Firms, The Stock Market, And Corporate Governance Flashcards
What is a partnership
A firm owned jointly by two or more persons and not organized as a corporation
What is a corporation
A legal form of business that provides owners with protection form losing more than their investment should the business fail
What is an asset
Anything of value owned by a person or a firm
What is limited liability
A legal provision shielding owners of the corporation from losing more than they have invested in the firm
What is separation of ownership from control
A situation in a corporation in which the top management, rather than the shareholders, controls day to day operations
What is corporate governance
The way in which a corporation is structured and the effect that structure has on the corporation behavior
What is a principle agent problem
A problem caused by an agent pursuing his own interests rather than the interests of the principle who hired him
What are the 3 principle methods of raising funds in small business owners
Retained earnings, recruit additional owners, and borrow
What is indirect finance
A flow of funds from savers to borrowers through financial intermediaries such as banks
What are intermediaries
Raise funds from savers to lend to firms ( and other borrowers )
What 2 financial securities do direct finance take the form of
Bonds and stocks
What is a bond
A financial security that represents a promise to repay a fixed amount of funds
What are stocks
A financial security that represents partial ownership of a firm
What is a income statement
A summary of the firms revenue, costs, and profit over a period of time, typically a 12 month fiscal year
What is a balance sheet
A financial statement that sums up a firms financial position on a particular day, usually the end of a quarter of year
