FNCE chapter 1- Intro Flashcards
what is finance
decisions that deal with how money is raised and used
primary forms of business organizations
proprietorship
partnership
corporation
goals of a corporation
maximize shareholders’ value and stockholder wealth which maximizes the stock price
managerial actions to maximize stockholders’ wealth
capital structure decisions
capital budgeting decisions
dividend policy decisions
factors influenced by managers that affect stock price
projected cash flow
time of cash flow streams
agency relationships
exists whenever a principal hires an agent to act on his or her behalf
business ethics
a standard of conduct and moral behaviour
corporate governance
the set of rules a firm follows when conducting business
forms of business in other countries
foreign firms have a higher concentration of ownership and different financial institutions
five reasons firms go International
seek new markets
seek new material
seek new technology
seek production efficiency
avoid political and regulatory hurdles
factors distinguishing domestic firms from multinational firms
different currency denominations
economic and legal ramifications
language and cultural differences
roles of governments
political risk
proprietorship
unincorporated business owned by one individual
partnership
business owned by two or more owners
corporation
a legal entity created by the state which means it has the legal authority to act like a person when running a business
limited liability partnership
A partnership wherein at least one partner is designated as a general partner with unlimited personal financial liability, and the other partner’s liability is limited to the amounts they invest in the firm
limited liability company
Offers the limited personal liability associated with a corporation; however, the company’s income is taxed like that of a partnership
decisions financial managers make can affect a firm’s value because
they affect the amount, timing, and riskiness of the cash flows the firm produces
firms value
a function of the cash flows it is expected to generate in the future and the rate of return at which investors are willing to provide funds to the firm
value
the worth of the expected future cash flows restated in current dollars
earnings per share (EPS)
net income divided by the number of outstanding shares in common stock
stakeholders
those who are associated with a business
ex. manager, employee, stockholder etc
investors prefer
more value
receive cash sooner rather than later
less risk
