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Helps people and businesses make decisions about when to buy when to sell and about what to buy and went to sell


Financial management

Is the art of science of managing wealth

Create or preserves that can make value of the assets of an individual small business or corporation


Cycle of money

The movement of money from lender to borrower and back again


What are the two things that remain constant

One the cycle of money 2 The economic objective of improving each participant's wealth


What are the four main areas that finance is partitioned into

•Corporate finance •investments
•financial institutions in markets
•international finance


Corporate finance

The set of financial activities that support the operations of corporations or businesses its use of money and those decisions that affect the wealth of the owners



Are generally like to re-centering on the buying and selling of assets both real and financial


Real assets

The physical assets such as property buildings and commodities including corn oil and


Financial assets

Intangible assets such as stocks And bonds


Financial institutions in markets

Are the organize financial in term media Aries and the forum that promote the cycle of money


What are the four ways one can classify The financial market

•By type of asset traded
•by the maturity of the asset
•by the owner of the asset
•by the method of sale


Equity markets

We are stocks are bought and sold


Debt markets

Where bonds are bought and sold


Derivative markets

Where future contracts on commodities are bought and sold or where options on equity future or currencies are bought and sold option markets


Foreign exchange markets

Where currencies are bought and sold


Maturity means what

The length of time the borrower has to pay back the borrowed funds


Money markets

These assets are short term loans sometimes as short as a day or two


Capital markets

Acids that have maturities over a year
Long term loans may include bonds are stock


Primary market

When a company puts out its own stock so that money can be invested back into the company


Secondary market

When the money of a sale goes to the initial buyer


Dealer markets

When a buyer buys things at a set price and then sells them thanks such a stocks and bonds or like a car dealership selling cars


What are the three main categories that financial management is divided into

•!Capital budgeting
•capital structure
•working capital management


Capital budgeting

The process of planning a valuating comparing and selecting a long-term operation project

Each company Picks it's business based on its ability to generate a profit

example make you sell shoes coke sells beverages


Capital structure

The means by which a company finances it's business activities. for public companies usually a mix of bonds and stocks that and equity sold to investors an owners

This answers the question where do we raise the money to conduct our business activities


Working capital management

The process of managing the day-to-day operating needs of a company through its current assets and current liabilities we also referred to this as short term financing activities of the company


What is a finance manager

Anyone who engages in any or all three of the financial management activities
capital budgeting
capital structure
working capital management


What is The objective of a financial manager

•Maximize profits
•Keep all the company's customers happy
•foster good relationships with local community
•maintain a safe and enjoyable work place
•Attract and retain good employees


Profit maximization

scaling down inventory will avoid cost which will in turn increase profit but it will also we potentially have the risk of losing sales of the products are not available in the future


A manager's responsibility is what

To make money for the owners


What is the primary objective of a publicly traded firm

Is to maximize the current stock price of the firm


What do stock prices reflect in a company

It reflects the company's future cash flow


How can one increase the future cash flow

One to maintain a safe and enjoyable workplace to attract and retain good employees

Good employees understand the business Are reliable and add value to products or services of the company

Also working closely with customers ensure that the products or services are meeting their needs

Establishing good working relationships with suppliers so that the company receives quality material in a timely manner

All these things play a role in increasing the firms Future cash flow and current stock prices


The goal of finance manager is to

Maximize the current market value of the equity of the company


What is the equity value of the company

It's value to the owner


What are the three legal categories that business organizations are categorized in

Proprietorships, partnerships and corporations


Soul proprietorship

Is a business owned entirely by an individual


Pros and cons about a soul proprietor

Pros the owner makes all the decisions no need to consult anyone daughter keeps all the profits

Disadvantages the owner pays all the bills even if it means personal assets and property is to cover their business
There is no difference between personal and company property
Entity is limited to the lifespan of the owner
Ability to raise capital is limited to the owners ability to do it this limits the supply of capital and growth development for the business



Joint by two or more individuals that spells out the percentage of ownership and level of participation


General partners

Who operate a daily business


Limited partners

Who participate only in certain aspects of the business


Silent partners

The ones who participate only as investors


Pros of a partnership

It involves more individuals in the business the business distribute all the profits only two it said individuals

Large number of owners usually increase the amount of capital available over that available soul proprietorship

Additional partners may also bring more talent and skill

The main disadvantage is that the personal aspect of the General partners are coming gold with the business assets and could potential he be required to settle business debts


Disadvantages of partnerships

Difficult transferring ownership from one partner to a new partner survival of business when one partner dies


What are the three things that both sole proprietorship and partnership have in common

Limited liability of the owners

Limited life of the business

Potentially difficult and transferring the ownership of the business



A legal entity separate from its owners

I can enter into contracts and conceal it can be sued and it pays taxes. They have a set of bylaws in the state and whichever states the corporation becomes a resident of it will pay taxes like any other citizen


What do the articles of incorporation include

The name of the business

Business intent of the corporation contented life

The number of shares the corporation can issue


What is the key advantage of a corporate organization

Shareholders and owners have a limited liability


Limited liability

Personal assets are separate from those of the company

The owners can only lose what they paid for their shares and thus are limited in their exposure to the debt on the firm


Disadvantages of a corporation

Government taxes company profits prior to distribution to the owners and the owners or text again on the receive distributions this is called double taxation


Hybrid corporations

Limited liability corporation's LLCs are a hybrid of partnership and corporations


Professional corporation PC

Joins together licensed professionals such as doctors lawyers accountants engineers architects the main advantage of a PC is that the owner and I said partners and the PC or not personally believe liable for the of their partners


S corporation

A corporation with fewer than 100 shareholders

The income of the corporation passes directly to the owners avoiding taxes at the corporate level


Who are the principles

The owners of the business


Who are the

The managers that maximize the current stock price


Principle agent problem

Where the agent needs to make more profit for the owner but that reduces his own payment but needs the owner to make money for promotion


Agency cost

When you overpay for something that wasn't actually done but you do not know if it was or wasn't


Stock option

The right to buy the company stock at a present price sometime in the future

This is also known as a incentive alignment mechanism


Agency very

The process on fixing the principal agent problem which is the problem between managers and owners trying to find ways to have the managers have an interest in making more money for the owners


Corporate governance

The area of the company where it decides how it will support management activities that benefit employees and suppliers customers and the surrounding community, also to encourage management to act in A ethical manner


What three things does the Sarbanes Oakley act (SOX) require

That the CEO and the CFO a test to fairness of the financial report

That the company maintain an effective internal control structure around financial reporting

But the company and auditors assess the effectiveness of the controls over most recent fiscal year


What are the four financial statements to measure a report performance of a firm

The balance sheet

The income statement

The statement of retained earnings

The statement of cash flow


The balance sheet

Is the first financial statement we consider it represents the assets owned by the company and all the claims against these assets



Are the things of economic value that a company owns physical or accounts receivable



Are the amounts of money that a company owes two others such as payroll taxes on money borrowed Lakeland



Can be physical like buildings financials which accounts receivable intellectual such as parents and trademarks or include cash itself



Is the amount of money a company owes to others, such as payroll taxes and money borrowed like loans



The third section of the balance sheet and it is what the owners receive after companies have satisfy their liabilities


Accounting identity

The identity is a relationship that is always satisfied for all the variables in the equation and as noted by the symbol = three line not two


Double entry bookkeeping

It is what ensures the balance sheet is balanced


From the finance perspective what are the five principles sections of information on the balance sheet

Cash account

Working capital accounts

Long term capital assets accounts

long-term debt accounts

ownership accounts


Cash accounts

Much like an individual checking account because it tells you how much money you currently have


Working capital accounts

I would current assets and current liabilities of the company both of these accounts together


Owners equity or stockholders equity

Is the remaining residual value of the company to the owners once the company has satisfied all liability


Income statement

Measures the company's financial performance over a specific period of time


Net income

Is the accounting profit from the operations of the company during the period


Cash flow

Is the increase or decrease in cash for that.


What are the three fundamental issues that separate net income and cash flow

Accrual-based accounting

Non-cash expense items

Interest expense


Generally excepted accounting principle GAAP

Are the set of accounting standards procedures and principles that companies follow when assembling the financial statements


Accrual-based accounting

When a company recognizes and records revenue at the time of sale whether or not it has received the revenue in cash


Operating cash flow

Earnings before interest and taxes + depreciation - taxes


Statement of retained earnings

Change in retained earnings = net income - distributed earnings


Casual identity

States that the cash flow from assets equal to the cash flow to creditors and owners

Cash flow from assets


What does cash flow from assets show

The success or failure of have a company uses the assets to generate cash inflow


Cash flow to creditors

Shows have a firm uses that to finance operations and it's repayment of the debt


Cash flow to owners

Completes the overview of financing and showing any additional contributions by the owners and the return of capital to the owners