Midterm Flashcards
The process of planning and managing a firm’s long-term investments.
Capital budgeting
The mixture of debt and equity maintained by a firm.
Capital Structure
A firm’s short-term assets and liabilities
Working Capital
A business owned by a single individual.
Sole Proprietorship
A business formed by two or more individuals or entities
Partnership
A business created as a distinct legal entity owned by one or more individuals or entities
Corporation
The possibility of conflict of interest between the owners and management of a firm.
Agency Problem
Someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm
Stakeholders
The amount an investment is worth after one or more periods.
Future Value
The process of accumulating interest in an investment over time to earn more interest.
Compounding
Interest earned on the reinvestment of previous interest payments.
Interest on interest
Interest earned on both the initial principal and then interest reinvested from prior periods
Compound interest
Interest earned only on the original principal amount invested.
Simple Interest
The current value of future cash flows discounted at the appropriate discount rate
Present Value
Calculation of the present value of some future amount
Discount
