intro to finance chapter 1
what is the organizational chart?
BOD Chairman of board and chief executive officer president and chief operations officer VPs of marketing, finance, production treasurer and controller
are shareholders the only stakeholder in a firm?
NO
do partnerships pay dividends?
NO
scandal of Sarbanes-Oxley included
Tyco Enron WorldCom
a sole proprietorship is
a business owned by one person simplest and least regulated form of organization
a corporation is
a legal "person" separate and distinct from its owners and can borrow money and own property, can be sued, and can enter into contracts and can own stock in another corporation
working capital consists of
accounts receivable current (short-term) assets accounts payable
how is a sole proprietorship taxed?
all business income is taxed as personal income
in a partnership
all the partners share in gains or losses and all have unlimited liability for all partnership debts which is described in partnership agreement
in a limited partnership a limited partner is limited to
amount of cash put into it
treasury consists of
cash manager credit manager capital expenditures financial planning
controller is responsible for
corporate tax reporting
controller's office handles
cost and financial accounting, tax payments management information systems
cash flow goes back into the financial market by
dividends and debt payments
corporations can
enter into contracts acquire and exchange property be sued and sue
working capital managetment refers to
firm's short-term assets such as inventory and short-term liabilities, such as money owed to suppliers
capital budgeting
identifying value of the cash flow generated by an asset exceeds the cost of that asset
a good financial decision will
increase the value of the firm's existing stock increase market value of shareholder's equity
Sarbanes-Oxley Act in 2002
known as the Sarbox, intended to protect investors from corporate abuse. prohibits personal loans from a company to its officers and annual reports
Sarbanes-Oxley
list any deficiencies in internal controls accept responsibility for material errors in the annual report confirm the validity of the annual financial report
what are the 3 questions you should be able to answer?
long term investments long term financing management everyday
capital budgeting associated with
long-term assets
firm's capital structure consists of
long-term debt equity
since ________ and ownership are separated, a corporation's life is unlimited
management
in a shareholder-manager relationship, who is the agent?
managers as shareholders are the principal
capital structure is
mixture of debt and equity
limited partnerships include
one or more general partner who runs the business with unlimited liability and more limited partners who will not actively participate in the business
advantages of corporation include
ownership can be readily transferred as shares of stock and life of corporation is therefore not limited
important things when considering a partnership
personal liability for firm debts taxation of partnership income fund raising limitations
agency relationship is
relationship between stockholders and management whenever the principal hires another agent to represent his or her interests
shareholders can also be called
residual owners
owners of corporation are called
shareholders
a stakeholder is
someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm
large corporations usually usually separated into
stockholders and managers
financial goals
survive avoid financial distress and bankruptcy beat the competition maximize sales or market share minimize costs maximize profits maintain steady earnings growth
controller consists of
tax manager cost accounting manager financial accounting manager data processing manager
stockholders control the corporation because?
they elect the directors
financial manager is in charge of what?
those three questions. usually vice president of finance or CFO
treasurer's office responsible for
three general questions
the main goal of financial management is
to maximize shareholder wealth
goal of financial management is
to maximize the current value per share of the existing stock
