Finance 300: chapter 1
stocks & bonds
a corporation receives cash from financial markets by selling..... and.......
investments
area of finance concerned with asset allocation
how to finance long-term investments, which long-term investments to make, managing day-to-day finances of the firm
business finance is broadly concerned with...
partnership
business without separate legal authority, formed by two or more people
long-term assets
capital budgeting is concerned with making and managing expenditures on...
banks, insurance companies, brokerage firms
companies that specialize in financial matters
financial manager
concerns with capital budgeting & structure as well as working capital management
agency problem
conflict of interest btwn an agent & a principal
agency costs
costs incurred due to a conflict of interest btwn stockholders & management are called
general partnership
each owner has unlimited liability for all firm debts, and it is difficult to transfer ownership
working capital management
ensuring that the firm has sufficient funds to continue operations on a day to day basis
Chief Financial Officer(CFO)
financial activity is associated with which top officer
shareholder
gets paid after the employees, suppliers and creditors
working capital management
how do we manage the day-to-day finances of the firm?
capital structure
how should we pay for our assets? should we use debt or equity?
external capital limitations, unlimited liability, limited life of a business
important when considering a partnership
long-term debt and equity
included in a firm's capital structure
to maximize current share value
main goal of financial management
treasurer's responsibilities
making financial plans, handling cash flows, and managing capital expenditure decisions
Corporations in the other countries
often called limited liability companies, joint stock companies, or public limited companies
sole proprietorship
one of the simplest types of businesses to form, and has a limited life
corporation
ownership is transferred by gifting or selling shares of stock
over the counter market
participants buy & sell from their own inventory of securities and are called dealers
increase value of existing shares of stock
primary responsibility of financial managers
Corporations can sue and be sued, enter contracts, and are a separate legal entity with the ability to acquire and exchange property
reasons a corporation is the most important form of business
Sarbanes-Oxley Act
requires corporate officers to be responsible for errors in the annual report and confirm the validity of the financial statements
treasurer
responsible for managing the firm's cash
management
since ..... and ownership are separated, a corporation's life is unlimited.
Three major forms of business
sole proprietorship, partnership, and corporation
controller responsibilities
tax reporting and payments as well as financial accounting
managers
the agent in a shareholder-manager relationship
investments, corporate finance, financial institutions, international finance
the basic areas of finance
proxy fight
used by unhappy stockholders to replace current management
capital budgeting
what long-term investments or projects should the business take on?
hostile takeover
what threat motivates managers to make good decisions
corporations
what type of business can issue stock, has legal powers to sue, and provincial citizenship for jurisdictional purposes
sole proprietorship
what type of business has unlimited personal liability for all business debts and obligations
primary market
where proceeds from sale of securities go to the issuing firm and where the initial public offerings are made
international finance
which of the main areas of finance could be a specialization under the other three?
controller & treasurer
which position generally reports to the CFO?
employees, suppliers, government
who are considered non-owner stakeholders in a company
federal government
who taxes both corporate earnings and shareholder dividends
cash, inventory, short-term assets
working capital includes...
