Summary Financial Management: Chapters 1 - 5

Sarbanes-Oxley Act - A law passed by Congress that requires the CEO and CFO to certify that their firm's financial statements are accurate. Proprietorship - An unincorporated business owned by one individual. Partnership - An unincorporated business owned by two or more persons. Corporation - A legal entity created by a state, separate and distinct from its owners and managers, having unlimited life, easy transferability of ownership, and limited liability. S Corporation - A special designation that allows small businesses that meet qualifications to be taxed as if they were a proprietorship or a partnership rather than a corporation. [or] A small corporation that, under Subchapter S of the Internal Revenue Code, elects to be taxed as a proprietorship or a partnership yet retains limited liability and other benefits of the corporate form of organization. Limited Liability Company (LLC) - A popular type of organization that is a hybrid between a partnership and a corporation. Limited Liability Partnership (LLP) - Similar to an LLC but used for professional firms in the fields of accounting, law, and architecture. It provides personal asset protection from business debts and liabilities but is taxed as a partnership. Intrinsic Value - An estimate of a stock's "true" value based on accurate risk and return data. The intrinsic value can be estimated, but not measured precisely. Market Price - The price at which a stock sells in the market. Marginal Investor - A representative investor whose actions reflect the beliefs of those people who are currently trading a stock. It is the marginal investor who determines a stock's price. Equilibrium - The situation in which the actual market price equals the intrinsic value, so investors are indifferent between buying and selling a stock. [or] The condition under which the expected return on a security is just equal to its required return, and the price is stable. Corporate Raiders - Individuals who target corporations for takeover because they are undervalued. Hostile Takeover - The acquisition of a company over the opposition of its management. Stockholder Wealth Maximization - The primary financial goal for managers of publicly owned companies implies that decisions should be made to maximize the long-run value of the firm's common stock. Business Ethics - A form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations. Spot Markets - The markets in which assets are bought or sold for "on-the-spot" delivery. Futures Markets - The markets in which participants agree today to buy or sell an asset at some future date. Money Markets - The financial markets in which funds are borrowed or loaned for short periods (less than one year). Capital Markets - The financial markets for stocks and for intermediate- or long-term debt (one year or longer). Primary Markets - Markets in which corporations raise capital by issuing new securities. Secondary Markets - Markets in which securities and other financial assets are traded among investors after they have been issued by corporations.