Chapter 1 Flashcards
The difference between the cash flows a company will produce both with and without the investment it is thinking about making
Incremental Cash Flow
The cost of making a choice in terms of the next best alternative that must be foregone
Opportunity Cost
A market where the prices of securities at any instant in time fully reflect all publicly available information about the securities and their actual public values
Efficient Market
Problems and conflicts resulting from the separation of the management and ownership of the firm
Agency Problems
The decision-making process with respect to investment in fixed assets
Capital Budgeting
The decision-making process with funding choices and the mix of long-term sources of funding
Capital Structure Decision
The management of the firm’s current assets and short-term financing
Working Capital Management
Those institutions and procedures that facilitate transactions in all types of financial claims
Financial Markets
Business owned by a single individual
Sole Proprietorship
Association of two or more individuals joining together as co-owners to operate a business for profit
Partnership
A partnership where all partners are fully liable for the indebtedness incurred by the partnership
General Partnership
A partnership where one or more of the partners has limited liability, restricted to the amount of capital he or she invests in the partnership
Limited Partnership
An entity that legally functions separate and apart from its owners
Corporation
A corporation that, because of specific qualifications, is taxed as though it were a partnership
S-corporation
A cross between a partnership and a corporation under which the owners retain limited liability but the company is run and is taxed like a partnership
Limited Liability Company
