Finance MBA30 May/June
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•a security representing a claim to income. Two principal types:
–Share (Stock)—ownership interest in company...Entitled to share of the firm’s profits, either in dividends or future growth
–Bond—debt interest in company...entitled to interest and repayment of principal
- –ownership interest in company •Entitled to share of the firm’s
- profits, either in dividends or future growth
- –debt interest in company
- -entitled to interest and repayment
- of principal
- - Has specific collateral... a debenture is unsecured
When a company sells shares for the first time; company gets money
Selling shares second hand... second time they are sold (not from company)
How do you raise equity financing?
How do you raise debt financing?
What is internal financing?
Accounting vs finance
Accounting: System of record keeping to report on firms operations
Finance: process of decision making related to raising money, analyzing results, etc.
in charge of accounting department
deals with finance activities
who reports to CFO?
both the controller and treasurer
Management (agent) is controlling resources owned by shareholders (principal) and may not make the decisions shareholders want (i.e. management compensation)
How do you manage the "agency problem"?
- - monitoring mangement (audits)
- - Tie management bonuses to corporate profit or stock performance.
How is income tax calculated?
- 1. total income - tax deductions = taxable income
- 2. taxable income x tax rates = total tax
- 3. total tax - tax credits = net tax payable
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