The Corporate Finance Framework and Environment Flashcards
(39 cards)
What is a company
A company is a legally recognised entity created to do business
What does a group structure of companies consist of
A group structure consists of a parent company and one or more subsidiary companies
Who manages companies
Companies are managed by a board of directors
Who owns companies
Shareholders own companies
What is limited liability
Limited liability means shareholders financial risk is limited to the amount they invested in shares
What are the rights of shareholders
Rights of shareholders are:
- Right to vote at company meetings
- Right to receive dividends
How is a company publicly traded
If a companies shares are listed on the stock exchange they are publicly traded
What must public companies do for the market
Companies must make company announcements to keep the market informed about significant developments
Where do funds come from
Funds come from shareholders(equity) and lenders(debt)
How do the providers of funds expect returns
Providers expect returns in the form of dividends(shareholders) or interest(lenders)
What are the three key financial decisions
The Three key financial decisions are:
- Financing decision
- Investment decision
- Dividend decision
What does the financing decision mean
Financing decision is how the business should be funded
What does the financing decision involve balancing
Financing decision involves balancing risk and cost of capital
What does the business need to do with the investment decision
With the investment decision the business needs to decide where to invest its funds
What do businesses evaluate with the investment decision
With the investment decision businesses need to evaluate potential projects
What does the dividend decision involve deciding
The dividend decision involves deciding how much profit should be returned to shareholders vs. reinvested
What does return to providers of finance mean
Returns to providers of finance means companies must reward shareholders and lenders appropriately
Where is financial decision-making centralised
Financial decision-making is centralised at the head office
Who is the key personal for financial management
Key personal for financial management are:
- Board of Directors
- Chief Financial Officer (CFO)
- Financial Accountant
- Finance Manager/Treasurer
- Management Accountant
What are the financial managers responsibilities
Financial manager responsibilities are:
- Cash flow and profit forecasting
- Short-term financing and cash management
- Risk management
- Investment appraisal
- Long-term financing decisions
- Dividend policy
What are external factors
External factors are factors that lie outside the company’s control
What are the different external factors
Different external factors are:
- Economic conditions
- Foreign exchange rates
- Competitors’ actions
- Legal and regulatory changes
What are the different internal factors
Different internal factors are:
- Sectors and product/service mix
- Geographical spread
- Operational efficiency
- Financial efficiency
What does start up finance consist of
Start up finance consists of equity and loans
