Fin120 Flashcards
Which type of firm generates the most revenue in the United States?
Corporations
The owners of which type of firms are unlimitedly liable for the firms debt?
Partnerships and Sole-Proprietorships
Which type of firms is subject to double taxation
Corporations
What is the goal of a financial manager working in a corporation?
Maximize the shareholders equity
What are the main tasks of a financial manager
- Make investing decisions (capital budgeting)
- Make financial decisions
- Manage short term cash needs (working capital management
Public corporations
-Shares trade on stock market
-Can have many shareholders
-Required to file its financial statements with SEC
Private corporations
-No organized market for shares of a private corporation
-limited number of owners
What are the four required financial statements?
-Balance sheet
-Income statement
-The statement of Cashflows
-Statement of stockholders equity
Market Value
-What investors believe the firm’s aissetscan produce in the future
Book Value
the difference between assets and liabilities based on historical costs
Valuation Principle
the value of an asset is based on the expected future cash flows
agency problem
possibility of conflict of interest between stockholders and management firm