Chapter 1 Flashcards
deals with the issue of whether stock and bond markets at any given time are too high, too low, or about right
market analysis
business trend
- globalization
- ever-improving information technology
- corporate governance
A law passed by Congress that required the CEO and CFO to certify that their firm’s financial statements are accurate
Sarbanes-Oxley Act
company’s attitude and conduct toward its employees, customers, community, and stockholders
Business Ethics
have money to invest and businesses, individuals, and other entities that need capital for various reasons
savers
regulates banks and controls the supply of money
Federal Reserve System
useful motivational tools include
- reasonable compensation packages
- firing of managers who do not perform well
- threat of hostile takeovers
like LLC but used form professional firms in the fields of accounting and architecture.
Limited Liability Partnership
primary goal for managers of publicly ownerd companies
shareholder wealth maximization
deals with finding the proper values of individual securities
security analysis
the acquisition of company over the opposition of its management
hostile takeover
other term for financial management
corporate finance
relate to decisions concerning stocks and bonds and include number of activities
Investments
disadvantages of proprietorship
- have unlimited personal liability
- life of business is limited
- difficulty in obtaining large capitala
a special designation that allows small businesses that meet qualifications to be taxed as if they were a proprietorship or a partnership rather than a corporation
S Corporation
the stock value based on perceived but possibly incorrect information as seen by the marginal investor
market price
deals with the best way to structure portfolios or baskets, of stocks and bonds
portfolio theory
an individual who targets a corporation for takeover because it is undervalued
corporate raider
investment include number of activities
- security analysis
- portfolio theory
- market analysis
an estimate of a stock’s true value based on accurate risk and return date. it can be estimated but not measured precisely
Intrinsic Value
regulates the trading of stocks and bonds in public markets
Securities and Exchange Commission
directs the firm’s operations, which include marketing, manufacturing, sales, and other operating departments
COO (Chief Operating Officer)
if firm is publicly owned, the CEO and CFO must both certify to the _____ that FS are accuarate
SEC
where investor psychology is examined in an effort to determine if stock prices have been bid up to unreasonable heights in a speculative bubble or driven down
Behavioral finance
advantages of proprietorship
- easily and inexpensively formed
- subject to few govt regulations
- subject to lower income taxes than are corporations
hybrid between a partnership and corporation
Limited Liability Company (LLC)
focuses on decisions relating to how much and what type of assets to acquire, how to raise the capital needed to purchase assets, and how to run the firm so as to maximize its value
financial management
relate to the markets where interest rates, along with stock and bond prices, are determined
capital markets
3 areas of finance
- financial management
- capital markets
- investments
accounting department fall under the control of the
Chief Financial Officer (CFO)
generally a senior vice president and third-ranking officer, is in charge of accounting, financing, credit policy, decisions regarding asset acquisition, and investor relations, which involves communication with stockholders and the press
CFO (Chief Finance Officer)
implement an aggressive overhaul of the US financial regulatory system aimed at preventing reckless actions that would cause another financial crisis
Dodd-Frank Act
forms of business organization
- proprietorship
- partnership
- corporation
- limited liability companies
- limited liability partnerships
the situation in which the actual market price equals the intrinsic value, so investors are indifferent between buying or selling a stock
equilibrium
an investor whose views determine the actual stock price
marginal investor
