Exam 1 FIN Flashcards
Capital Budget
Planning and mamaging a firm’s long-term investment.
In capital bugeting, a finanicial manager tries to?
Identify investment opportunities that generate cashflow, that exceeds the cost of the asset.
Capital Structure
Mixture of debt and equity maintained by a firm.
Working Capital
A firms short-term assets (Inventory) and liabilities(Money owed to suppliers).
In working capital, a financial manager inssures?
That the firm has sufficient resources to continue its operations and avoid costly interruptions.
In capital structure we determine how we pay for our assets through either?
Debt or equity.
Chief Financial Officer
Top fiancnial manager within firm
Treasurer oversees?
Cash managment, Credit managment, Capital expenditures, and financial planning
Controller oversees?
Taxes, Cost accounting, Financial Accounting, and Data processing
Capital structure affects whether a firm can obtain and manage?
The long-term financingit needs to support its long-term investments.
A concern of capital budgeting is when they expect that cash and how often.
True or False
True
Size, Timing, and Risk of future cashflow si the essence of capital budgeting.
True or False
True
Capital structure determines what percentage of the firm’s cashflow goes to creditors and what percentage foes to shareholders.
True or False
True
Sole Proprieteorship
Business owed by single person
Sole Priprietorship advantages?
Easiest to start, Taxed once, All profits kept, Less regulated
Partnership
Two or more individuals
Sole Proprietorship Disadvantages?
Unlimited liability, Limited to woners life span, Hard to sell ownership interest, Equity capital limited to owener’s wealth
Partnership Advantages?
Two or more owener, More capital availble, Easy to start, income taxed once
Partnership disadvantages?
Unlimited liability in general partnership, dissolves when a partner dies, difficult to transfer ownership
Limited partnership
one or more general partner will run the business with unlimited liability, but there will be one or more limited partners.
Corporation
A disrtinct legal entity composed of one or more individual or entities
Corportation Advantages
Limities liablity, unlimited life, soperation of ownership and managment, transfer ownership easily, easier to raise capital
Corporation disadvantages
Separation of ownership and management, double taxation.
Agency Problems
The possibility of conflict of interest between the stockholders and management of a firm.
Agency Relationship
The relationship between stockholders and management. Principles hire agents to run company
Managerial Compensation
Incentives used to align MGT and stockholders interests
Corporate control
The threat of a take over may result in better management
Stakeholders
Someone other than a stakeholder or creditor who potentially has a claim on the cash flows of the firm
Primary Market
A market that issues new securities on the exchange
Secondary Market
A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves.
