BUSI - Ch. 16 (Understanding Financial Management and Securities Markets)

Investment professionals who are paid to manage other people's money

Institutional investors

Risk

The potential for loss

Secured short-term loans are usually secured by

accounts receivable and inventory

Organized stock exchanges operate like a(n)

auction company

Capital budgeting

selects asset proposals for maximum profitability

Commercial Paper

short-term unsecured debt issued by large corporations (a type of IOU)

Term loans

- may be repaid on a quarterly, semiannual, or annual schedule - can be secured or unsecured - are available from commercial banks, insurance companies, pension funds, commercial finance companies, and manufacturer's financing subsidiaries - are capital expenditure loans with a maturity of more than one year

Financial Managers

Those who focus on obtaining needed funds for the successful operation of an organization and using those funds to further organizational goals (short and long term)

The Securities Exchange Act of 1934 gave the SEC the power to

control the organized exchanges

The major advantage of debt financing is the

deductibility of interest expenses

Dividends are

payments to the shareholders from company earnings