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corporate finance ch. 1

STUDY
PLAY
capital budgeting
the process of planning and managing a firm's long-term investments.
capital structure
the mixture of debt and equity maintained by a firm
working capital
a firm's short term assets and liabilities
sole proprietorship
a business owned by a single individual
partnership
a business formed by two or more individuals or entities
corporation
a business created as a distinct legal entity owned by one or more individuals or entities
agency problem
the possibility of conflict of interest between the owners and management of the firm
stakeholder
someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm.
capital budgeting
what long term investments should the firm make?
capital structuring
how will this investment be financed?
working capital management
how will we manage the day-to-day financial activities?
what is the primary goal of financial management?
to maximize share value for shareholders
sarbox or sox
sets up compliance, driven by corporate scandals
sarbox or sox
created to minimize accounting fraud
sarbox or sox
intended to strengthen protection against accounting fraud and financial malpractice.
NASDAQ
digital stock
NYSE
physical stock
liquidity
speed and ease of conversion to cash without significant loss of value.
market value
________ ________ is more important than book value when making decisions
depreciation
loss of value
depreciation
_________ does not affect cash flow.
CFFA
cash flow from assets
OCF
operating cash flow
NCS
net capital spending
cash flow from assets =
cash flow to creditors + cash flow to stockholders
cash flow from assets =
OCF - net capital spending - change in NWC
OCF =
earnings before interest and taxes (EBIT) + depreciation - taxes
cash flow to stockholders
dividends paid - net new equity raised