Finance Exam 1 Vocab Flashcards
Goal of the firm:
Shareholder wealth maximization AKA Maximizing firm value/Maximizing stock price
Sole Proprietorship:
A business owned by a single individual
General Partnership:
Two or more owners. Each owner is fully responsible for liabilities.
Limited Partnership:
Partnership in which one or more partners have limited liability.
Corporation:
A business that functions separately and apart from its owners. All owners have limited liability.
S-Corporation:
Provides limited liability but taxed like a partnership.
Limited Liability Company (LLC):
Provides limited liability, taxed like a partnership, but more flexible than an S-corporation.
Public Offering:
Securities are made available to all individual and institutional investors.
Private Placement:
Securities are offered and sold directly to a limited number of investors.
Primary Market:
Corporation receives money by selling new securities, often to an investment bank.
Secondary Market:
Investors buy and sell existing securities.
Money Market:
Market for short-term debt instruments (less than one year)
Capital Market:
Market for long-term financial instruments.
Spot Market:
Market where something sells today.
Future Market:
Market where you can buy or sell something at a future date.
Organized Security Exchange:
Formal organization for buying and selling securities.
Over-the-counter Market:
All security markets except organized security exchanges. A network of brokers and dealers linked by a computer.
Unbiased Expectations Theory:
The term structure is determined by expectations of future rates.
Liquidity Preference Theory:
Investors require maturity premiums to invest in longer term securities.
Market Segmentation Theory:
There are seperate markets for long and short term investments.
