chapter 1 finance vocab

where to invest? how to raise money to fund the investment? how to manage cash flows from daily operations?

the study of how people and business evaluate investments and raise capital to fund them- management of money

institutions and procedures that facilitate financial transactions

serves under the firm's CEO and is responsible for overseeing financial planning, strategic planning, and controlling the firm's cash flow

serves under CFO and handles firm's financial activities

responsible for managing the firm's accounting duties- financial statements, cost accounting, paying taxes, firm's financial well-being

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

two or more persons come together as co-owners

all partners are fully responsible for liabilities incurred by the partnership

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

limited stability for a partner who is purely an investor (for limited partnership)

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)

direction and policies of the corporation, oftentimes through elected bard of directors

to the amount of investment in company (in corporation)

owners; corporation continues to exist through easy transfer of ownership

taxed

doesn't affect the continuity of the corporation

number of shares owned relative to the total number to shares outstanding determines stockholder's personal assets in settlement of unresolved claims

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)

benefits: limited liability, taxed as partnership (no double taxation)

a cross between a partnership and a corporation

• increase revenue
• reduce expenses
• lower governmental regulation standards
• increase global exposure

country risk (government, economic changes), currency risk (fluctuations in exchanges rates), cultural risk (language, traditions, ethics)