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Flashcards in Chapter 1 Deck (14)
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1

capital (2)

financial: money
real: long-term plant and equipment

2

capital structure theory

importance of debt and equity in firm

3

sole proprietorship positives (3)

1. simplicity of decision making
2. low organisational and operational costs
- tax as belonging to individual owner

4

sole proprietorship negatives (1)

1. unlimited liability to owner

5

partnership formed through

articles of partnership

6

partnership positives (2)

1. raise more capital
2. share ownership responsibilities

7

partnership negatives (1)

1. unlimited liability

8

limited liability partnership

general partners - unlimited liability
limited partners - liable for initial investment

9

corporation

1. legal entire unto itself
2. formed through articles of incorporation
3. owned by shareholders who have limited liability
4. (negative) double taxation

10

subchapter s corporation

income is taxed as direct income to stockholders and thus only taxed as normal income

11

agency theory

relationship between owners and managers
ex. management acted in own interest

12

valuation approach

how earnings are valued by investor

13

insider trading

using information not available to the public to trade in securities

14

financial markets (4)

1. public financial markets
2. corporate financial markets
3. money markets: short term securities
4. capital markets: securities have life of more than 1 year