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Conflicts of interest between a principal and an agent. |
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The costs arising from conflicts of interest between a principal and an agent.
Example: Between a firm's owners and its management. |
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Legally declared inability of an individual or a company to pay its creditors. |
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Financial markets where equity and debt instruments with maturities greater than one year are traded. |
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The mix of debt and equity that is used to finance a firm. |
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CFO
The most senior financial manager in a company. |
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A legal entity formed and authorized under a state charter.
In a legal sense, a corporation is a "person" distinct from its owners. |
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The situation in which one party in a business transaction has information that is unavailable to the other parties in the transaction. |
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The legal liability of a limited partner or stockholdere in a business, which extends only to the capital contibuted or the amount invested. |
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Limited Liability Partnership |
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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. |
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The dollar difference between current assets and current liabilities. |
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Two or more owners who have joined together legally to manage a business and share in its profits. |
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Privately Held Corporations |
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(Closely Held)
Corporations whose stock is not traded in public markets; also called closely held corporations. |
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The tangible and intangible assets a firm uses to generate cash flows. |
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Markets regulated by the Securities and Exchange Commission in which large amounts of debt and equity are publicly traded. |
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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. |
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A business owned by a single individual. |
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Anyone other than an owner (stockholder) with a claim on the cash flows of a firm, including employees, suppliers, creditors, and the government. |
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The economic value of the assets someone possesses. |
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Which of the following is a basic source of funds for the firm? |
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Financial markets in which equity and debt instruments with maturities greater than one year are traded are called |
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Which of the following can help align the behavior of managers with the goals of shareholders? |
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managerial labor markets management compensation an independent board of directors |
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Capital budgeting involves |
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determining which productive assets a firm should buy. |
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One of the best ways to reduce agency conflict is by |
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designing an effective compensation package. |
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