COB 300 FINANCE EXAM 1 - ELIZ OZCAN
forms of business organization - Answers - sole proprietorship, partnership, corporation
sole proprietorship - Answers - - Single owner, easy to start, taxed once
- unlimited personal liability, difficult to transfer ownership
partnership - Answers - - two or more owners, more capital available, taxed once
- unlimited liability, dissolves when a partner leaves
corporation - Answers - - separate legal entity, easy to raise capital, limited liability
- double taxation, more regulated
goals of the business enterprise - Answers - main goal: increase the value of the firm
- balancing interest of shareholders and society
finance - Answers - focuses on managing money and investments, emphasizing the
time value of money
accounting - Answers - involves recording and reporting financial transactions
economics - Answers - studies the production, distribution, and consumption of goods
and services
Intrinsic value - Answers - long term concept indicating a stocks true worth
stock prices - Answers - can deviate from intrinsic values in the short run
market equilibrium - Answers - stock price = intrinsic value
stockholder-manager conflicts - Answers - managers may pursue goals that conflict with
maximizing shareholder wealth
stockholder-debtholder conflict - Answers - stockholders prefer riskier project while
debtholders want to limit risk
business ethics - Answers - Ethical business practices impact long-term profitability
market capitalization - Answers - total value of a company's shares
formula: Market Cap = number of outstanding shares x market price
capital allocation process - Answers - capital flows from those who supply it to those
who demand it
ex: direct transfers, investment banks, financial intermediaries
forms of business organization - Answers - sole proprietorship, partnership, corporation
sole proprietorship - Answers - - Single owner, easy to start, taxed once
- unlimited personal liability, difficult to transfer ownership
partnership - Answers - - two or more owners, more capital available, taxed once
- unlimited liability, dissolves when a partner leaves
corporation - Answers - - separate legal entity, easy to raise capital, limited liability
- double taxation, more regulated
goals of the business enterprise - Answers - main goal: increase the value of the firm
- balancing interest of shareholders and society
finance - Answers - focuses on managing money and investments, emphasizing the
time value of money
accounting - Answers - involves recording and reporting financial transactions
economics - Answers - studies the production, distribution, and consumption of goods
and services
Intrinsic value - Answers - long term concept indicating a stocks true worth
stock prices - Answers - can deviate from intrinsic values in the short run
market equilibrium - Answers - stock price = intrinsic value
stockholder-manager conflicts - Answers - managers may pursue goals that conflict with
maximizing shareholder wealth
stockholder-debtholder conflict - Answers - stockholders prefer riskier project while
debtholders want to limit risk
business ethics - Answers - Ethical business practices impact long-term profitability
market capitalization - Answers - total value of a company's shares
formula: Market Cap = number of outstanding shares x market price
capital allocation process - Answers - capital flows from those who supply it to those
who demand it
ex: direct transfers, investment banks, financial intermediaries
