FIN Ch. 1

Question 1

capital budgeting

Answer 1

process of planning and managing a firm’s long term investments

Question 2

capital structure

Answer 2

mixture of debt and equity maintained by a firm

Question 3

working captial

Answer 3

firm’s short term assets and liabs.

Question 4

goal of financial management

Answer 4

maximize market share, future stock price & wealth of owners

Question 5

agency problem

Answer 5

possibility of conflict of interest between owners & management of firm

Question 6

stakeholder

Answer 6

someone other than stockholder or creditor who potentially has claim on cash flows of firm