corporate finance 1 (lectrure 9) Flashcards
Three main forms of business in NZ
sole trader-owns all assets, all risk etc
parternship/joint venture- establish partnership-combine overseas capital and networks etc
companies-must register company
what must a company have to be registered
registered name, shares, shareholders, director
company structure
shareholders-owners.
board of directors-board manages company, members are elected by shareholders
top management- ceo , coo cfo etc
staff
what are agency problems
a manager who acts as an agent for stockholders acts in own interest instead of maximising market value- claming expenses, avert risk to secure position etc
how to combat agency problems
compensation plans
board of directors
takeovers
monitoring
whats accounting
preperation of accountiong recors, prep analysis and interpretation of financial statements
economics def
study of choices made by people who face scarcity
finance def?
all about investments and how they chose to invest, and managment of firm
financial manager role
issue shares
borrow
provide certainty against market fluctuations (hedging, futures)
pay bills etc, stay solvent.
what is hedging
reducing risk of an investment by making another with negativ ecorrelation, reduce loss if bad thing happen
what are involved in investment decisions
whether to do project or not
what one to do if they are mutually exclusive
roi npv and pi
what is roi npv and pi
return on investment
net present value
Profitiability index
payback period
time taken for cashflows to pay back inital investment
payback rule
project is accepted if the payback period is less than specific cutoff period
investment descions on payback period
no account of time value of money
no vlaue given to cash flows after cutoff
cut off abritrayr
emphasis on liquidity
