Fin120 Flashcards

1
Q

Which type of firm generates the most revenue in the United States?

A

Corporations

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2
Q

The owners of which type of firms are unlimitedly liable for the firms debt?

A

Partnerships and Sole-Proprietorships

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3
Q

Which type of firms is subject to double taxation

A

Corporations

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4
Q

What is the goal of a financial manager working in a corporation?

A

Maximize the shareholders equity

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5
Q

What are the main tasks of a financial manager

A
  1. Make investing decisions (capital budgeting)
  2. Make financial decisions
  3. Manage short term cash needs (working capital management
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6
Q

Public corporations

A

-Shares trade on stock market
-Can have many shareholders
-Required to file its financial statements with SEC

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7
Q

Private corporations

A

-No organized market for shares of a private corporation
-limited number of owners

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8
Q

What are the four required financial statements?

A

-Balance sheet
-Income statement
-The statement of Cashflows
-Statement of stockholders equity

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9
Q

Market Value

A

-What investors believe the firm’s aissetscan produce in the future

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10
Q

Book Value

A

the difference between assets and liabilities based on historical costs

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11
Q

Valuation Principle

A

the value of an asset is based on the expected future cash flows

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12
Q

agency problem

A

possibility of conflict of interest between stockholders and management firm

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