Finance Chapter 1
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What is corporate Finance?
- The study of ways to answer these three questions
- what long term investments shouuld you take on?
- where will you get the long-term finiancing to pay for your investment?
- how will you manage your everyday financial activites such as collecting form customers and paying supplies?
What is the role of the financial manager in the corporation?
to represent the owner's interst and make decisions on their behalf. they are in charge of ansering the three questions involved in corporate finance
What is the goal of financial management?
to maximie the current value per share of the existing stock
What is capital budgeting
the process of planning and managing a firms long-term investments
What is capital structure
the mixture of debt and equitity maintied by a firm
What is working capital
a firm's short-term assets and liabities
a business owned by a single individual, disadvantage no distiniction between personal and business income so all businese income is taxed as personal income and limited life span, also very difficult to transfer ownership
a business formed by two or more individuals or entities, the ability of this businese to grow can be seriosly limited by an inability to raise cash for investment, difficult to transfer ownership
a businese created as a distinct legal entity composed of one or more individuals or entities
Another Definition of corporate finace
the study of the relationship between busineses decisions and the value of the stock in the business
The act Sarbanes-Oxley or Sarbox
is intended to protect investors from corporate abuses,
the possiblity of conflict of interst between the stockholders and management of a firm
someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm
what is a dealer market? how do dealers and auctiosn markets differ?
- they are both secondary markets, dealer markets in stock are called OTC or over the counter markets,
- auction markets differ form dealer in two ways, an auction market or exchange has a physcial location second in a dealer market most of the buying and selling is done by the dealer
what is the largest auction market in the US?
New york Stock Exchange NYSE it accounts for more than 85 percent of all tehs hares traded in auction markets
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