FINANCE- Chapter 1

A limited liability company is taxed like a ___________ and its owners have __________ liability

partnership; limited

important mechanism used by unhappy stockholders to replace current management

proxy fight

primary market

refers to original sale of securities by governments and corporations, corporations raises funds in financial markets

agency relationship

relationship between stockholders and management

What are shareholders often called?

residual owners

secondary market

securities are bought and sold after the original sale

someone other than an owner or creditor who potentially has a claim of the cash flows of a firm

stakeholder

The costs incurred due to a conflict of interest between stockholders and management are called

agency costs

What is the main goal of financial management?

To maximize shareholder wealth

The rules used by a corporation to regulate its existence are known as

bylaws

The controller is responsible for:

handles cost and financial accounting, tax payments, management information systems

capital structure

mixture of debt and equity maintained by a firm

Indirect agency costs are often due to lost _____________

opportunities

Most equity shares of large firms in the US trade on:

organized auction markets

shareholders

owners of a corporation

agency problem

conflict of interest between an agent and a principal

Included in working capital:

current assets accounts payable accounts receivable

Two basic classifications under which most potential financial goals fall are:

earning/increasing profits and controlling risk