Fundamentals of Corporate Finance Ch. 1
agency problem - ANS - the possibility of conflict of interest between the owners and
management of the firm
\auction market - ANS - ex: NYSE; has a physical location, match those who wish to sell with
those who wish to buy (limited role of dealers)
\capital budgeting - ANS - the process of planning and managing a firm's long-term investments
\capital budgeting - ANS - what long term investments should the firm make?
\capital structure - ANS - the mixture of debt and equity maintained by a firm
\capital structuring - ANS - how will this investment be financed?
\cash flow from assets = - ANS - cash flow to creditors + cash flow to stockholders
\cash flow from assets = - ANS - OCF - net capital spending - change in NWC
\cash flow to stockholders - ANS - dividends paid - net new equity raised
\CFFA - ANS - cash flow from assets
\corporation - ANS - a business created as a distinct legal entity owned by one or more
individuals or entities
\dealer market - ANS - aka over-the-counter; buy and sell for themselves, at their own risk; ex:
NASDAQ (smaller than NYSE)
\depreciation - ANS - _________ does not affect cash flow.
\depreciation - ANS - loss of value
\liquidity - ANS - speed and ease of conversion to cash without significant loss of value.
\listing - ANS - traded on the exchange in question, often strict criteria must be met
\market value - ANS - ________ ________ is more important than book value when making
decisions
\NASDAQ - ANS - digital stock
\NCS - ANS - net capital spending
\NYSE - ANS - physical stock
\OCF - ANS - operating cash flow
\OCF = - ANS - earnings before interest and taxes (EBIT) + depreciation - taxes
\partnership - ANS - a business formed by two or more individuals or entities
\primary market - ANS - original sale of securities by governments and corporations, ex: public
offerings, private placements
\sarbox or sox - ANS - created to minimize accounting fraud
\sarbox or sox - ANS - intended to strengthen protection against accounting fraud and financial
malpractice.
\sarbox or sox - ANS - sets up compliance, driven by corporate scandals
\secondary markets - ANS - one owner or creditor selling to another, ex: day-to-day stock
trading
\sole proprietorship - ANS - a business owned by a single individual
\stakeholder - ANS - someone other than a stockholder or creditor who potentially has a claim
on the cash flows of the firm.
agency problem - ANS - the possibility of conflict of interest between the owners and
management of the firm
\auction market - ANS - ex: NYSE; has a physical location, match those who wish to sell with
those who wish to buy (limited role of dealers)
\capital budgeting - ANS - the process of planning and managing a firm's long-term investments
\capital budgeting - ANS - what long term investments should the firm make?
\capital structure - ANS - the mixture of debt and equity maintained by a firm
\capital structuring - ANS - how will this investment be financed?
\cash flow from assets = - ANS - cash flow to creditors + cash flow to stockholders
\cash flow from assets = - ANS - OCF - net capital spending - change in NWC
\cash flow to stockholders - ANS - dividends paid - net new equity raised
\CFFA - ANS - cash flow from assets
\corporation - ANS - a business created as a distinct legal entity owned by one or more
individuals or entities
\dealer market - ANS - aka over-the-counter; buy and sell for themselves, at their own risk; ex:
NASDAQ (smaller than NYSE)
\depreciation - ANS - _________ does not affect cash flow.
\depreciation - ANS - loss of value
\liquidity - ANS - speed and ease of conversion to cash without significant loss of value.
\listing - ANS - traded on the exchange in question, often strict criteria must be met
\market value - ANS - ________ ________ is more important than book value when making
decisions
\NASDAQ - ANS - digital stock
\NCS - ANS - net capital spending
\NYSE - ANS - physical stock
\OCF - ANS - operating cash flow
\OCF = - ANS - earnings before interest and taxes (EBIT) + depreciation - taxes
\partnership - ANS - a business formed by two or more individuals or entities
\primary market - ANS - original sale of securities by governments and corporations, ex: public
offerings, private placements
\sarbox or sox - ANS - created to minimize accounting fraud
\sarbox or sox - ANS - intended to strengthen protection against accounting fraud and financial
malpractice.
\sarbox or sox - ANS - sets up compliance, driven by corporate scandals
\secondary markets - ANS - one owner or creditor selling to another, ex: day-to-day stock
trading
\sole proprietorship - ANS - a business owned by a single individual
\stakeholder - ANS - someone other than a stockholder or creditor who potentially has a claim
on the cash flows of the firm.
