Corporate Finance Ch.1 The Goals & Functions of Financial Management – Flashcards
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Finance is about making decisions that focus on creating ____ within the firm.
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Value
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Finance builds upon the disciplines of economics and ?
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Accounting
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Economics provides theories about economic system and ?
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Decision Making
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What long term investments or projects the firm should undertake is what kind of decision?
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Capital Budget Decision
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How the firm should pay for these assets, issuing equity or debt are what kinda decisions?
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Capital Structure Decision
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How much cash or inventory the firms hold carry is what kind of decision?
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Working Capital Management Decision
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The decisions made are within what kind of framework?
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Risk-Return
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The primary goal of financial management is what?
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Maximize shareholder wealth
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What should these goals be measured by?
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Share Price
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The goal of maximizing shareholder wealth may conflict with?
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interests of management (their compensation) and social/ethical goals
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This theory is about the potential conflict between shareholders and managers.
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Agency Theory
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The goal of shareholder wealth maximization can be consistent with a concern for?
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Social Responsibility
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Finance functions include:
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corporate finance, banking, securities, money management, financial planning
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This is when there is one owner, largest in actual number but smallest in total sales revenue
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Sole Proprietorship
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This is when there are two or more owners.
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Partnership
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Legal entity unto itself, smallest in actual number but largest in total sales revenue.
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Corporation
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This type of market are those markets for governments to borrow funds for public activities.
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Public Financial Markets
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These markets are those for corporations to raise funds.
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Corporate Financial Markets
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These markets deal in short term securities. Less than one year.
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Money Markets
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These markets deal in long term securities.
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Capital Markets
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This market is where a firm issues new bonds or shares.
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Primary Market
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These markets are where investors buy and sell outstanding bonds or shares
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Secondary Market
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These are representations of ownership or equity in the company
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Stock (Share)
