Chapter_3_-_Terms_and_Questions_Answers - Chapter 3....

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Chapter 3. Corporate Finance, Creating Shareholder Value and Corporate Governance List of Terms 1. CFO - Company officer responsible for managing a corporation’s finance function. The CFO primarily oversees a corporation’s working capital decision, the capital budgeting decision and the capital structure decision. 2. Controller - Corporation officer who handles and monitors a corporation’s accounting and audit activities. The Financial Controller oversees tax accounting, cost (internal) accounting, financial (external) accounting as well as the data collecting/processing systems. 3. Treasurer - Company officer responsible for managing a corporation’s finance function. Smaller companies tend to use the term treasurer, while larger companies typically use the term chief financial officer to represent the officer responsible for the finance function. 4. Capital Budgeting - The process of managing a corporation’s investment decisions. 5. Capital Structure - The mixture of financing (debt and equity) a corporation uses to finance its operations. 6. Working Capital - The short-term assets and liabilities of a corporation 7. Shareholder value - Return that investors receive for their capital. This return is realized through dividend disbursements, stock buy-backs, and capital gains on stock price increases. 8. Corporate governance - Interaction between shareholders and management intended to assure that management uses invested capital to maximize shareholder value. 9. Sole proprietorship - A form of business organization. A sole proprietorship is a business owned by one person. 10. Partnership - A company formed by two or more individuals and can be either a general partnership or a limited partnership. In a general partnership, each partner is liable for the debts of the partnership and shares in the profits and losses of the firm. Limited partnership limit the liability to the amount of cash contributed by each partner. 11. Corporation - A form of business organization. The main characteristics of this form of business organization include limited liability, corporate taxes in addition to personal income taxes for its owners. Corporate ownership is easily transferable. 12. Limited / unlimited liability. - In a business with limited liability, owners are only liable for the amount of cash contributed by each investor. In a business with unlimited liability, owners are liable for an amount greater than their investment in the company. 13. Dividends - A method of providing return to the shareholders when part of free cash flows generated by the company is distributed to the shareholders. 14. Stock buy-back - A method of providing return to the shareholders through buying back corporate stock. 15.
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This note was uploaded on 09/22/2008 for the course B A 301 taught by Professor Gray,garyjosephwoolridge,joseph during the Spring '07 term at Pennsylvania State University, University Park.

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Chapter_3_-_Terms_and_Questions_Answers - Chapter 3....

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