Finance Exam 1 (Chapters 1-4)
4 Basic Areas of Finance - Corporate Finance
Financial Institutions
Investments
International Finance
Financial Institutions - Companies that specialize in financial matters.
- Banks
- Brokerage Firms
- Insurance Companies
What is involved in the Investments side of Finance? - Stocks and Bonds
Valuing Financial Assets
Capital Budgeting Decision - What long-term investments should the business take on?
Capital Structure Decision - How should we pay for your assets?
Debt or Equity?
Working Capital Management Decision - How do we manage the day-to-day finances of the firm?
3 Forms of Business Organization - Sole Proprietorship
Partnership
Corporation
What is the Goal of Financial Management? - -Maximize the current value per share of the companies
stock
, - Maximize the value of the existing owners' equity
What is the Agency Problem - Conflicts between the Principal (Stockholder) and Agent (Managers)
What is another name for Principal? - Stockholder
What is another name for Agent - Manager
What is the Balance Sheet? - Snapshot of the firms Assets and Liabilities at any given point
Balance Sheet Identity (Equation) - Assets = Liabilities + Shareholders' Equity
Debt vs. Equity (Equation) - Shareholders' Equity = Equity - Liabilities
Net Working Capital - Current Assets - Current Liabilities
What is Liquidity? - Speed and ease of conversion to CASH
Book Value vs. Market Value - Book Value: The BALANCE SHEET value
Market Value: The TRUE value in the market
Income Statement Equation - Net Income = Income - Expenses
What is the income statement? - Measured performance over a specidied period of time
Noncash Items - Expenses charged against revenue that do not affect cash flow
AKA Depreciation
GAAP Matching Principle - -Recognize revenue when it is fully earned
4 Basic Areas of Finance - Corporate Finance
Financial Institutions
Investments
International Finance
Financial Institutions - Companies that specialize in financial matters.
- Banks
- Brokerage Firms
- Insurance Companies
What is involved in the Investments side of Finance? - Stocks and Bonds
Valuing Financial Assets
Capital Budgeting Decision - What long-term investments should the business take on?
Capital Structure Decision - How should we pay for your assets?
Debt or Equity?
Working Capital Management Decision - How do we manage the day-to-day finances of the firm?
3 Forms of Business Organization - Sole Proprietorship
Partnership
Corporation
What is the Goal of Financial Management? - -Maximize the current value per share of the companies
stock
, - Maximize the value of the existing owners' equity
What is the Agency Problem - Conflicts between the Principal (Stockholder) and Agent (Managers)
What is another name for Principal? - Stockholder
What is another name for Agent - Manager
What is the Balance Sheet? - Snapshot of the firms Assets and Liabilities at any given point
Balance Sheet Identity (Equation) - Assets = Liabilities + Shareholders' Equity
Debt vs. Equity (Equation) - Shareholders' Equity = Equity - Liabilities
Net Working Capital - Current Assets - Current Liabilities
What is Liquidity? - Speed and ease of conversion to CASH
Book Value vs. Market Value - Book Value: The BALANCE SHEET value
Market Value: The TRUE value in the market
Income Statement Equation - Net Income = Income - Expenses
What is the income statement? - Measured performance over a specidied period of time
Noncash Items - Expenses charged against revenue that do not affect cash flow
AKA Depreciation
GAAP Matching Principle - -Recognize revenue when it is fully earned
