48 Cards in this Set
| Front | Back |
|---|---|
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Sarbanes- Oxley Act
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requires CEO & CFO to certify that their firm's financial statements are accurate.
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Proprietorship
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business owned by ONE individual
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Partnership
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business owned by two or more people
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Corporation
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legal entity created by a state; has unlimited life, easy transferability of ownership and limited liability
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Advantage of proprietorship and partnership
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ease of formation,subject to few regulations, no corporate income taxes
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Disadvantages of proprietorship and partnership
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difficult to raise capital, unlimited liability, limited life
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S Corporation
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allows small business to be taxed as a proprietorship or partnership; cannot have more than 100 shareholders
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LLC & LLP
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LLC= hybrid of partnership and corporation
LLP= professional firms (accounting, law, medical)
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Intrisitc value
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estimate of a stocks true value based on accurate risk; can be estimated but not exact.
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Market price
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price seen by marginal investor; based off of perceived data
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Marginal Investor
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views and determines actual stock price.
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Corporate raiders
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they target corporations for takeover because they are undervalued
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Hostile takeover
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acquisition of a company over the opposition of its management
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Primary goal for managers
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decisions should be made to maximize the long-run value of the firms stock.
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Spot market
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assets are bought or sold on the spot.
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Future market
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markets in which participants agree today to buy or sell at a future date.
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Money market
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funds are borrowed or loaned for a short period (1 year)
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Capital market
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market for buying and selling long term assets (stocks, mortgages, etc)
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Primary market
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corporations raise capital by issuing NEW securities. (common stock)
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Secondary market
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traded among investors after they are issued by corporation. (NY stock exchange)
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Private market
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worked out directly between 2 parties.
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Financial asset
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stock, bond, mortgage
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Physical asset
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claim on physical asset (wheat, auto, real estate)
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Derivative
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any financial asset whose value is derived from the value of another underlying asset
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Commercial bank
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traditional department store of finance serving a variety of savers and bankers.
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Financial Services Corp.
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firm that offers a wise range of financial services, investments, banking, brokerage, operations, commercial banking. (Citigroup)
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Credit Union
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members are supposed to have a common bond (like being employees at the same company)
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Mutual funds
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pool investors funds to purchase financial instruments and reduce risk
|
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Money market fund
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mutual funds invest short term low risk securities and allow investors to write checks against their accounts
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Private equity
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they buy and manage the entire firm
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Hedge fund
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accept money from savers and use to buy various securities
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Speculating
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in hope of high returns; but raises the risk exposure
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Hedging
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reduce risk exposure
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OTC
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large collection of brokers and dealers, connected electronically by telephones and computers
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Dealer market
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all facilities that are needed for security transactions
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Closely held corp.
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owned by a few individuals who are associated with management
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Efficient market
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prices are close to intrinsic value
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Bid Ask
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bid price= willing to purchase # for $
ask price= selling at $
bid ask= ask $- bid $
profit= bid ask * # of bid
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Simple interest
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FV=
PV+PV(I)(N)
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Compounding interest
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FV=
PV*(1+r)^N
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Annuity
|
deposits at end of each year
PV or FV= 0
|
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Annuity Due
|
deposits at beginning of each year
has greater outcome than annuity
**have to change calc to beg!!!!!**
if an additional is added at the end then FV will have a number and wont be 0.
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Compounded quarterly, semiannually, etc
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FV=
PV*
(1+(r/m))^(m*n)
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Nominal rate
|
actual rate
|
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Periodic rate
|
nominal/ m
|
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amortization schedule
|
*yr
*beg.
*pmt= constant
*i/y paid= i/y * beg
*principal = pmt - i/y paid
*end = beg - principal
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mortgages
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PV= (-) mortgage
FV= 0
i/y= r/12 (annual)
n= n*12 (annual)
|
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uneven cash flows
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- solve each yr as FV with n being yr #
- find PV for each
- add up all PV
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FIN 3303: EXAM 1