Investors and Other Stakeholders Flashcards
What is “Financial Leverage”?
The use of debt in the capital structure.
Measured using ratios such as:
(1) EBIT/EBT
(2) Debt / Equity
What is “Dilution”?
An increase in the number of shares outstanding from share issuance that decreases the percentage of shares owned by existing shareholders.
What are “Stakeholders”?
Any party with an interest, financial or non-financial, in an entity or its actions.
What is “Shareholder Theory of Corporate Governance”?
A theory espoused by Milton Friedman, the shareholder theory holds that the objective of a business is to increase profits and shareholder value.
What is “Stakeholder Theory of Corporate Governance”?
An expansion of the shareholder theory under which the objective of a business is to maximize value for, and balance the interest of, a broad group of shareholders.
What are “Private Debt Holders”?
Investors in an entity’s non-securitized debt claims, such as a loan or a lease.
The most common type of private debtholder is a bank.
What are “inside directors”?
Members of a corporation’s board of directors who are not independent.
What are “independent directors”?
Members of a corporation’s board who do not have an employment nor familiar relationship with the company, nor do they have a relationship that would impair their independence.
What is a “Supervisory board”?
In some jurisdictions, a corporation’s board of directors is formally composed of a “supervisory board” and a “management board”.
The “supervisory board” appoints and oversees management board and often includes representatives of employees and other non-shareholder stakeholders.
What is a “Staggered Board”?
A structure where only a part of the board is elected simultaneously.
It is an obstacle to shareholders seeking to make change.
What is “Human Capital”?
The accumulated knowledge and skill that the workers acquire and its value to the company.
What are “Negative Externalities”?
A cost to a third party because of the production or consumption of a good or service.
What does “Material” mean?
Refers to information that is decision-useful for a reasonable investor.
What are “Physical Risks”?
Economic and financial losses from the increase in the severity and frequency of extreme weather due to climate change.
What are “Transition Risks”?
Economic and financial losses from the transition to a lower-carbon economy in response to climate change. For example, the abandonment of an oil well that is no longer economical.
