Financial Management Exam 1 Chapter 1 – Flashcards
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working capital management
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the management of a firm's short-term assets and liabilities
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primary goal of financial management
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maximize the current value per share of existing stock
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agency problem
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a conflict of interest between the stockholders and management of a firm
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agency cost
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the costs of any conflicts of interest between stockholders and management
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Sarbanes Oxley Act of 2002
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protect investors from corporate abuses
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chief financial officer
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the treasurer and the controller of a corporation generally report to this person
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proxy fight
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a group solicits proxies to replace the board of directors
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Securities Act of 1933 and Securities Exchange Act of 1934
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the basic regulatory framework in the US
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The Securities Act of 1933
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issuance of new securities
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The Securities Exchange Act of 1934
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insider trading
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corporation
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the type of business organization that has all respective rights and privileges of a legal person and best suited to raising large amounts of capital
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the bylaws
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mandate the procedure for electing corporate directors
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accounts payable, long-term debt, inventory
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working capital management includes decisions concerning these
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the current stockholders are the owners of a corporation so
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financial managers should strive to maximize current value per share
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threat of a proxy fight could
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convince managers to work in the best interest of its stockholders
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accounting profits and cash flows are
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generally not the same since GAAP allows for revenue recognition separate from the receipt of cash flows
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sole proprietorship
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business entity that is easily and cheaply setup, is limited to the business owner's life, and business taxes are paid as individual tax
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advantages of a corporation
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limited liability for firm debt, ability to raise capital, unlimited firm life
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