chapter 1 finance vocab

  1. three broad issues addressed by the study of finance
    where to invest? how to raise money to fund the investment? how to manage cash flows from daily operations?
  2. finance is
    the study of how people and business evaluate investments and raise capital to fund them- management of money
  3. financial management
    institutions and procedures that facilitate financial transactions
  4. CFO
    serves under the firm's CEO and is responsible for overseeing financial planning, strategic planning, and controlling the firm's cash flow
  5. treasurer
    serves under CFO and handles firm's financial activities
  6. controller
    responsible for managing the firm's accounting duties- financial statements, cost accounting, paying taxes, firm's financial well-being
  7. sole proprietorships
    a business owned by an individual - owner is responsible without limitation for the liabilities incurred, termination occurs on owner's death or by his choice, owner maintains title to assets and profits
  8. Partnerships
    two or more persons come together as co-owners
  9. general partnership
    all partners are fully responsible for liabilities incurred by the partnership
  10. limited partnerships
    one or more of the partners have limited liability, restricted to the amount of capital invested in the partnership; at least 1 partner must have unlimited liability, names of limited partners may not participate in the management of the business/can't have names appear in the name of the firm
  11. limited partnerships provides
    limited stability for a partner who is purely an investor (for limited partnership)
  12. corporation
    legally functions separate and apart from its owners- owners elect a board of directors whose members in turn select individuals to serve as corporate officers (president, ect)
  13. owners (shareholders of corporations) dictate
    direction and policies of the corporation, oftentimes through elected bard of directors
  14. shareholder's liability is restricted
    to the amount of investment in company (in corporation)
  15. life of corporation doesn't depend on the....
    owners; corporation continues to exist through easy transfer of ownership
  16. corporations are ____ separately
  17. death or withdrawal of an investor
    doesn't affect the continuity of the corporation
  18. ownership is reflected in common stock certificates
    number of shares owned relative to the total number to shares outstanding determines stockholder's personal assets in settlement of unresolved claims
  19. double taxation
    when a corporation earns profit, pats taxes on those profit (the first taxation of earnings) and pays some of those profits back to the shareholders in the form of dividends and then shareholders pay person income taxes on those dividends (second taxation of those earnings)
  20. S-type corporations
    benefits: limited liability, taxed as partnership (no double taxation)
  21. LLC
    a cross between a partnership and a corporation
  22. why go abroad?
    • increase revenue
    • reduce expenses
    • lower governmental regulation standards
    • increase global exposure
  23. risk/challenges going abroad (3)
    country risk (government, economic changes), currency risk (fluctuations in exchanges rates), cultural risk (language, traditions, ethics)
Card Set
chapter 1 finance vocab
chapter 1 finance vocab