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Ch1 The Finance Manager and The Firm
FIN300 FIN 300 Olander
24
Finance
Undergraduate 3
09/02/2012

Additional Finance Flashcards

 


 

Cards

Term
Agency Conflicts
Definition
Conflicts of interest between a principal and an agent.
Term
Agency Costs
Definition
The costs arising from conflicts of interest between a principal and an agent.

Example: Between a firm's owners and its management.
Term
Bankruptcy
Definition
Legally declared inability of an individual or a company to pay its creditors.
Term
Capital Markets
Definition
Financial markets where equity and debt instruments with maturities greater than one year are traded.
Term
Capital Securities
Definition
The mix of debt and equity that is used to finance a firm.
Term
Chief Financial Officer
Definition
CFO

The most senior financial manager in a company.
Term
Corporation
Definition
A legal entity formed and authorized under a state charter.

In a legal sense, a corporation is a "person" distinct from its owners.
Term
Information Asymmetry
Definition
The situation in which one party in a business transaction has information that is unavailable to the other parties in the transaction.
Term
Limited Liability
Definition
The legal liability of a limited partner or stockholdere in a business, which extends only to the capital contibuted or the amount invested.
Term
Limited Liability Partnership
Definition
LLP

Hybrid business organizations that combine some of the advantages of corporations and parnerships.

In general, income to the partners is taxed only as personal income, but the partners have limited liability.
Term
Net Working Capital
Definition
The dollar difference between current assets and current liabilities.
Term
Partnership
Definition
Two or more owners who have joined together legally to manage a business and share in its profits.
Term
Privately Held Corporations
Definition
(Closely Held)

Corporations whose stock is not traded in public markets; also called closely held corporations.
Term
Productive Assets
Definition
The tangible and intangible assets a firm uses to generate cash flows.
Term
Public Markets
Definition
Markets regulated by the Securities and Exchange Commission in which large amounts of debt and equity are publicly traded.
Term
Residual Cash Flows
Definition
The cash remaining after a firm has paid operating expenses and what it owes creditors and in taxes.

Can be paid to the owners as a cash dividend or reinvested in the business.
Term
Sole Proprietorship
Definition
A business owned by a single individual.
Term
Stakeholder
Definition
Anyone other than an owner (stockholder) with a claim on the cash flows of a firm, including employees, suppliers, creditors, and the government.
Term
Wealth
Definition
The economic value of the assets someone possesses.
Term
Which of the following is a basic source of funds for the firm?
Definition
Debt and Equity
Term
Financial markets in which equity and debt instruments with maturities greater than one year are traded are called
Definition
Capital markets
Term
Which of the following can help align the behavior of managers with the goals of shareholders?
Definition
managerial labor markets
management compensation
an independent board of directors
Term
Capital budgeting involves
Definition
determining which productive assets a firm should buy.
Term
One of the best ways to reduce agency conflict is by
Definition
designing an effective compensation package.
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