Exam 1 review

Exam 1 review - Finance 300 – Exam 1 Notes Corporation...

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Finance 300 – Exam 1 Notes Corporation – Legal entity authorized under a state charter - Owners of a corporation are its stockholders - Stockholders have limited liability for debts and other obligations of the corporation - Because the corporation is a legal person it must pay taxes on the income it earns - Owners are subject to double taxation because they must also pay tax on dividends - Privately held corporations are owned by a small number of investors and their shares are not traded publicly Sole Proprietorship – Business owned by one person - 75% of all businesses in the U.S are sole proprietorships - Responsible for paying all the firm’s bills and has unlimited liability for all business debts and other obligations of the firm - Difficult to transfer ownership Partnership – Consists of two or more owners who have joined together legally to manage a business. - About 10% of U.S businesses - All partners have unlimited liability in general partnership Stakeholder – someone other than an owner who has a claim on the cash flows of the firm - Managers - Creditors - Employees - Suppliers Bondholders – holder of bond and is paid before stockholder Fundamental Decisions in Financial Management 1. Capital Budgeting – identifying the productive assets the firm should buy 2. Financing decisions – Determining how the firm should finance or pay for assets. 3. Working capital management decisions – Determining how day- to-day financial matters should be managed so that the firm can pay its bills, and how surplus cash should be invested. Chapter 2 Federal Reserve System – The nation’s central bank, the institution that controls the money supply. - Conducts monetary policy Federal Open Market Committee (FOMC) – the monetary policymaking arm of the Federal Reserve. Financial Institutions – Firms such as commercial banks, credit unions, insurance companies, pension funds, and finance companies that provide financial services to the economy.
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- They invest their funds in financial assets such as business loans, stocks, and bonds, rather than real assets, such as plants and equipment CDs – Debt instruments issued by a bank that pay interest and are insured by the federal government. -
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This note was uploaded on 09/29/2008 for the course FIN 300 taught by Professor Olander during the Fall '08 term at ASU.

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Exam 1 review - Finance 300 – Exam 1 Notes Corporation...

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