Finance 301 Chapter 1

working capital

A firm's short-term assets and liabilities.

net working capital

Current assets - current liabilities = net working capital

Sarbanes Oxley

Intended to protect investors from corporate abuses

More General Goal: If not a publicly traded company

Maximize the market value of the existing owners' equity.

stakeholder

Someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm.

Financial Managers should

The goal of financial management is to maximize the current value per share of the existing stock.

capital structure

The mixture of debt and equity maintained by a firm.

agency problem

The possibility of conflict of interest between the stockholders and management of a firm.

Proxy fight

Unhappy stockholders move to change management by voting to replace someone's stock

capital budgeting

The process of planning and managing a firm's long- term investments.

Agency Relationships

The relationship between stockholders and management is called an agency relationship.

secondary markets

are those in which these securities are bought and sold after the original sale.

liabilities

current = life of less than one year like accounts payable long-term = loan of 5 years

assets

current = life of less than one year like cash, accounts recievable fixed = relatively long life

dealer markets

in stocks and long-terms debt (OTC) markets not a physical place

auction markets

physical place like wallstreet (NYSE)

primary market

refers to the original sale of securities by governments and corporations