50 Cards in this Set
| Front | Back |
|---|---|
|
What are the five types of firms?
1. ______ _____________
2. Standard ____________
3. Limited ____________
4. ________ _________ Companies
5. _____________
|
Sole Proprietorships
Partnerships
Partnerships
Limited Liability
Corporations
|
|
Name the Type of Firm
-owned by one or more owner with UNLIMITED liability
|
Sole proprietorship
|
|
Name the Type of Firm
-are owned by more than one owner and all owners have LIABILITY
|
Standard Partnerships
|
|
Name the Type of Firm
-has both general and limited partners, which have no management authority and LIMITED LIABILITY
|
Limited Partnerships
|
|
Name the Type of Firm
-all of the owners (members) have LIMITED LIABILITY, but can also manage their business
|
Limited Liability Companies
|
|
Name the Type of Firm
-most common type of firm, but makes up the smallest portion of revenues
|
Sole proprietorship
|
|
Name the Type of Firm
-the life of the firm IS limited to all of the partners
|
Standard Partnerships
|
|
Name the Type of Firm
-all owners have LIMITED LIABILITY and there is no limit on the # of owners
|
Corporations
|
|
Name the Type of Firm
-easy to set up, but difficult to transfer.
- the life of the firm IS limited to the life of the OWNER
|
Sole proprietorship
|
|
Name the Type of Firm
-costly to form, easy to transfer
-solely responsible for their own obligations
-have many of the same legal powers as people
- must be legally formed
|
Corporations
|
|
_____ ______ means their liability is limited to their investment.
|
limited liability
|
|
Advantage or Disadvantage to incorporating?
-Companies can raise substantial amounts of capital, because they can sell ownership shares to anonymous outside investors.
|
Advantage
|
|
Advantage or Disadvantage to incorporating?
-The difference in taxation arises because of the profits of the corporation.
|
Disadvantage
|
|
The Board of Directors are elected by _____________.
|
shareholders
|
|
The Board of Directors determine how top executives are ________.
|
paid
|
|
The Board of Directors monitors the firm ___________, and answer to _____________.
|
performance,
shareholders
|
|
The Chief Executive Officer is hired by the ______ ___ _______.
|
Board of Directors
|
|
The Chief Executive Officers institute policies created by the BOD on a _____ to ______ basis.
|
day to day
|
|
What are the two types of financial markets?
1. _________ market
2. _________ market
|
primary
secondary
|
|
________ market: the corporation issues NEW shares of stock and sells them directly to investors, with or without the aid of an investment bank.
|
primary
|
|
________ market: EXISTING shares of stock are sold between investors without the involvement of the corporation.
|
secondary
|
|
____ ____: the price stock can be sold at
|
bid price
|
|
_____ ____: the price stock can be bought at
|
ask price
|
|
_____ _____ _____: this is what a stock exchange makes from buying and selling the shares. It is considered a transaction cost.
|
Bid ask spread
|
|
The Financial Cycle
people ______ and _____ their money
money flows through ___________ who use it to fund growth for new projects
money flows back to ________ and investors and the cycle continues
|
invest,
save,
companies,
savers
|
|
Financial institutions aid with the financial cycle by:
moving funds from those who have extra funds to those who need funds
moving ______ through time
spreading ______ across large investor bases
|
funds,
risk
|
|
______ ______ require public companies to have their financial statements audited by an independent auditor. This aids with trust and comparability.
|
Accounting Regulations
|
|
The purpose of financial statements is to _______ a means for interested outside parties, such as creditors and investors, to obtain _________ about a firm with an overview of the short- and long-term financial condition of a business.
|
provide,
information
|
|
What are the five types of financial statements?
1. The _________ _________
2. The ________ __________
3. The Statement of ______ ______
4. The Statement of _________ _________
5. ___________ ________ and ____________
|
Balance Sheet
Income Statement
Cash Flows
Stockholder's Equity
Management Discussion & Analysis
|
|
Name the Financial Statement
-provides a snapshot of a firm's financial position at a given point in time
|
Balance sheet
|
|
Name the Financial Statement
-provides details about a firm's revenues and expenses over a period of time
|
Income Statement
|
|
Name the Financial Statement
-provides details about how a firm has used the cash it earned during a set period
|
Statement of Cash Flows
|
|
Name the Financial Statement
-provides a detailed break-down of the stockholder's equity from the balance sheet into the amounts that arise from issuing new shares and from retaining earnings
|
Statement of Stockholder's Equity
|
|
Name the Financial Statement
-preface to the financial statements and includes a discussion of the previous year. It addresses risks, issues, and off - balance sheet transactions that have a material impact on the firm's future performance.
|
Management Discussion and Analysis
|
|
____ _______ ______=
Current Assets - Current Liabilities
|
Net Working Capital
|
|
The ____ ______ ______ is how you determine how much money the company would have to pay today in cash in order to pay back all of its accounts payable.
|
Net Working Capital
|
|
Rather than being based on the historical cost of the firm's assets _______ _____ is dependent on what investors expect those assets to produce in the future.
|
market value
|
|
_____ _____ determines whether or not there is enough capital to meet short term needs.
|
current ratio
|
|
___ _____ ____ is a fraction of each dollar in revenues that is available to equity holders after the firm paid its expenses, taxes, and interest.
|
Net Profit Margin
|
|
______ _______ is how much a firm earns before interest and taxes from each dollar of sales.
|
operating margin
|
|
_____ ______ represents the amount of revenue generated per dollar of assets.
|
asset turnover
|
|
_____ ___ ____ (ROE) is the measure of return the firm has earned on its past investments.
|
Return on Equity
|
|
The ______ EPS must be lower or equal to EPS.
|
Diluted
|
|
EBITDA= reflects cash ________ from operations.
|
earned
|
|
The ______ to _______ ratio the lower the better.
|
price
earnings
|
|
The _______ principle states that
the value of an asset is determined by its competitive market price
the benefits and costs of a decision should be evaluated using those market prices
when the value of the benefits exceeds the value of the costs, the decision will increase the market …
|
valuation
|
|
The Law of One Price states that in competitive markets, __________ with the same cash flows must have the same price.
|
securities
|
|
The Rule of 72 tells you how long it will take you to ______ your money.
|
double
|
|
If the interest rate increases the future value will _______, and the present value will ________.
|
stay the same,
decrease
|
|
A ________ is a stream of cash flows of equal intervals that last forever.
|
perpetuity
|
Study Guide: Exam 3