Ch. 17 (3) Flashcards
list the first question that financial managers will ask (in setting long-term objectives)
what are the organization’s long-term goals and objectives
list the second question that financial managers will ask (in setting long-term objectives)
what funds do we need to achieve the firm’s long-term goals and objectives
list the second question that financial managers will ask (in setting long-term objectives)
what sources of long-term funding (capital) are available, and which will best fit our needs
debt financing involves …
borrowing money that the company has a legal obligation to repay
a term-loan agreement is a … that requires …
promissory note, the borrower to repay the loan in specific instalments
describe the benefit of a business using a term-loan agreement
the interest paid on the long-term debt is tax-deductible
a bond is a …
long-term debt obligation of a corporation or government
a company that issues a bond has …
a legal obligation to make regular interest payments to investors and to repay the entire bond principle amount at a prescribed time
equity financing involves …
selling ownership in the firm in the form of stock, or using earnings that have been retained by the company to reinvest in the business
what is an “initial public offering”?
the first time a corporation offers to sell new stock to the general public
a stock certificate is …
evidence of stock ownership that specifies the name of a company, the number of shares it represents, and the type of stock being issued
dividends are …
part of a firm’s profits that may be distributed to shares it represents, and the type of stock being issued
common stock are …
the most basic form of ownership in a firm (in fact, if a company issues only one type of stock, it must be common)
owners of preferred stock …
enjoy a preference in the payment of dividends; they also have a prior claim on company assets if the firm is forced out of business and its assets are sold
leverage refers to …
raising funds through borrowing to increase the firm’s rate of return
venture capital is …
money that is invested in new or emerging companies that are perceived as having great profit potential
