Structure of a Business Flashcards
Assets already made in the company. Their value is updated to reflect their current cash flow potential
Assets in place
2 types of assets
Assets in place and growth assets
assets that you expect the company to take in the future.
Growth assets
2 types of liabilities
Debt and Equity
These includes lenders, both short and long term. It first claim whatever cash flows the company is generating.
Debt
It is what is left to investors and owners when every debt and obligations are paid
Equity
True or False
the value of assets in place can be lower than what you invested if their earning powers has deteriorated
True
True or False
the value of assets in place can be higher than what you invested if their earning powers has improved
True
The value in growth assets is measured by what?
Excess returns
The value of a growth asset cannot be negative
False, it can be negative if you are in a business that makes bad investments before.
What are the 3 characteristics that set debt apart from equity?
- commitments to pay the lenders
- Failure in these commitment can lead to downfall of business or losing equity
3.tax law gives you benefit when borrowing
True or false
if you are a stockholder in public company, managers have discretion to decide how much is your dividend form cashflows.
true
2 types of contractual cash flows
Constant ( bank loan or corp bond) and Variable ( amount varies depend on variable)
