Chapter 1- Introduction To Corporate Finance Flashcards
What is “working capital management”?
Planning and managing the firm’s current assets and liabilities.
What is “capital structure”?
The mix of debt and equity maintained by a firm.
What is “sole proprietorship”?
A business owned by a single individual.
What is a “partnership”?
A business formed by two or more Co-owners.
What is a “corporation”?
A business created as a distinct legal entity owned by one or more individuals or entities.
What is the goal of financial management?
To maximize the current value per share of existing stock.
What is the “agency problem”?
The possibility of conflicts of interest between the shareholders and management of a firm.
What is “corporate governance”?
Rules for corporate organization and conduct.
What is a “stakeholder”?
Anyone who potentially has a claim on a firm.
What is a “money market”?
Financial markets where short term debt securities are bought and sold.
What are “capital markets”?
Financial markets where long term debt and equity securities are bought and sold.
Primary vs secondary markets
In a primary market transaction, the corporation is the seller, and the transaction raises money for the corporation. A secondary market transaction involves one owner or creditor selling to another. Therefore,the secondary markets provide the means for transferring ownership of corporate securities.
What is “financial engineering”?
Creation of new securities or financial processes.
What are “derivative securities”?
Options, future, and other securities whose value derives from the price of another, underlying, asset.
What is “regulatory dialectic”?
The pressures financial institutions and regulatory bodies exert on each other.
