Chapter 1 slides/vid Flashcards
What are the 4 different areas of finance?
1) Corporate Finance= Business Finance
2) Investments
3) Financial Institutions
4) International Finance
Managers apart of a company who are required to make financial decisions such as long term investment decisions, long-term financing to pay for the investments, and how they manage the everyday financial activities is all done by which form of finance?
Corporate/Business Finance
Facebook bought Instagram in 2012 for $1bn, and WhatsApp in 2014 for $19bn this is an example of what type of financial decision?
Long-term investments decision
Apple plans to sell $5.5 billion in bonds and amid a broader debt-issuing boom among technology giants in 2020 this is an example of which financing activity?
Long-term financing to pay for investments
Purchasing inventory is an example of which financing activity
Managing Every Day Financial Activities
Which area of finance works with financial assets such as stocks and bonds. This area also values financial assets, risks versus return, and asset allocation
Investments
Stockbroker or financial advisors
Portfolio Managers
Security Analyst are all examples of what type of job opportunities for which area of finance?
Investments
Which area of finance is a special industry made of 3 different types of firms like Banks, insurance companies, and mortgage bankers?
Financial Institutions
What are the 3 types of banks?
Commercial Banks
Investment Banks
Credit Unions
Which type of banks are known for assisting private companies to go public i.e initial public offering. They also offer specialized advice to companies who engage in merger and acquisition transactions
Investment Banks
The study of monetary interactions between two or more countries focusing on areas such as foreign direct investment and currency exchanged
International Finance
What are the financial management decisions?
Capital Budgeting
Capital Structure
What are the 3 forms of business organization?
Sole Proprietorship
Partnership
Corporation
What are the two subforms of partnership?
General
Limited
What are the two subforms of corporation?
C-Corp
Limited Liability Company
A legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity is known as?
C-Corp
T/F- Most of the large companies are recognized as a C-Corp
True
Are C-Corps subject to double taxation?
Yes
A limited liability company that offers protection to the owner from personal liability for any of the debts that a business incurs is known as
Limited Liability Company
T/F- LLCs and S corporations are two terms discussed side by side
True
Which type of classification is a tax classification
S Corporations
What are the advantages of sole proprietorships?
- Easiest to start
- Least regulated
- Single owner keeps all of the profits
- Taxed once as personal income
What are the disadvantages of sole proprietorships?
- Limited to life of owner
- Equity capital limited to owner’s personal wealth
- Unlimited liability
- Difficult to sell ownership interest
What er the advantages of partnership?
- Two or more owners
- More capital available
- Relatively easy to start
- Income taxed once as personal income
What are the disadvantages of partnership
- Unlimited liability
- General Partnership
- Limited Partnership
- Partnership dissolves when one partner dies or wishes to sell
- Difficult to transfer ownership
A legal “person” distinct from owners and a resident state is known as
Corporation
What are the advantages of corporation?
- Limited liability
- Unlimited life
Separation of ownership and management - Transfer of ownership’s easy
- Easier to raise capital
What are the disadvantages of corporation?
- Separation of ownership and management (agency problem)
- Double taxation (income taxed at the corporate rate and then dividends taxed at personal rate, while dividends paid are not tax reductions
What are the goals of financial management?
- Maximize the market value of the existing owners’ equity
The value of a publicly owned corporation is measured by its *** the share price of its stock
Marketcap
This is a market where companies first sell their securities and where they are created. This market sells new stocks and bonds to the public for the first time
Primary Market
Which type of market is where investors buy and sell securities they already own. Typically known as the stock market
Secondary Market
A business owned by one person is known as
Sole Proprietorship
A business owned by two or more persons is known as
Partnership
What act was driven by corporate scandals intended to strengthen protection against accounting fraud and financial malpractice?
Sarbanes-Oxley Act also known as SarBox 2002
