Finance 3000 ch1-4
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27 terms
Terms | Definitions |
|---|---|
 what are we doing? | trying to understand how decisions are made |
| Financial managers | make decisions to maximize shareholders wealth |
| max shareholders value: cash flows | increase inflows and decrease outflows |
| Max shareholder value:timing of those flow | a dollar today is worth more than one tomorrow. Timelines |
| max shareholder value: risk of those flow | less certain the flow, the less they are worth, = the price of cashflows |
| principal-agency problem | conflict of interests between stakeholders, monitors, controllers |
| stakeholders | stockholders, creditors, employees, society |
| monitors | with firm board of directors, outside firm(auditors, anaylsts, bankers, credit agency, attonerys), government SEC and IRS |
| controllers | managers |
| surplus economic units | there are entities that have more money than they need and want to earn something in return |
| deficit economic units | there are entities that have more ways to speed money than they have and want to borrow some |
| primary market | new car dealer, few players: stocks and bonds, money |
| secondary market | used cars, lots of players: investors, securities, money |
| Firms->investors | stocks and bonds transfer from firms to investors |
| Investors-> firms | money transfers from investors to firms |
| general stocks and bonds | claim on future money that is purchased today |
| price (cashflow) | shortages are traded reflect time and risk |
| balance sheet | model of the firm |
| yield curve | construct from treasury market |
| deficit and surplus units examples | time:banks, risk: insurance and pension funds, Denomination: mutual funds |
| federal reserve policy | establishes a playing field |
| accountants | give us the inputs |
| financial managers | need to make decisions |
| management | needs to control costs |
| marketing | needs to enhance revenue |
| balance sheet | point in time: assets(cash, other assets=firm value) and liabilities(debt, equity=firm value) |
| income statement | how you go to that point. |
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