Finance*

Card Set Information

Author:
zgreenk17
ID:
233256
Filename:
Finance*
Updated:
2013-09-06 14:58:13
Tags:
Finance
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Description:
Intro to Finance card set
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  1. Real assets vs. Financial assets
    real = assets used to produce goods and services (land, buildings, equipment, knowledge)

    financial = claims to the income generated by real assets
  2. Financial Assets/Securities (3)
    1. fixed income (debt)

    2. equities 

    3. derivatives
  3. Fixed income (debt) securities
    pay specific cash flow over specific period of time (ex: bonds)
  4. equities
    ownership share in a corporation (ex: stocks)
  5. Derivatives
    securities providing payoffs that depend on the values of other assets

    (ex: options, futures, and swaps)
  6. function of board of directors
    elected by shareholders to hire and supervise the management of a firm
  7. agency problems
    conflicts of interest between managers and shareholders in a firm
  8. mechanisms to mitigate agency problems
    1. compensation of management tied to stock price (ex: stock options)

    2. board of directors has ability to oust management

    3. threat of takeover (by shareholders via proxy contest or by another firm via buyout)
  9. proxy contest
    when shareholders seek to obtain enough proxies (rights to vote the shares of other stockholders) to vote in a different board of directors

    RARELY successful

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