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MGT 326 EXAM 1 Cheat Sheet

MGT 326 EXAM 1 Cheat Sheet - Chapter 1 Capital Budgeting...

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Chapter 1: Capital Budgeting decision (investment decision ): decision to invest in tangible or intangible assets. Value: should account for the amounts, timing, and risk of the future cash flows. Financing Decision: the form and amount of financing a firm’s investments. Capital Structure: the mix of long-term debt and equity financing. Short-Term Financing Decisions: how to raise cash to meet a short-term need. Short-Term Investment Decisions: how to invest spare cash for brief periods. Real Assets: assets used to produce goods and services. Financial Assets: financial claims to the income generated by the firm’s real assets. Securities: shares of stock and other financial assets that can be purchased and traded by investors. There are 8,000 public companies and hundreds of thousands of private companies. Corporation: a distinct, permanent legal entity. A business organized as a separate legal entity owned by stockholders. Limited Liability: the owners of a corporation are not personally liable for its obligations. Shareholders (Stockholders): owners of a corporation. Board of Directors: elected by stockholders, they appoint the top managers and monitor its performance. Separation of Ownership and Management: gives corporations permanence. Financial Manager: refers to anyone responsible for a significant corporate investment or financing decision. No single person responsible for every decision discussed in book. Treasurer: responsible for financing , cash management, and relationships with banks and other financial institutions. Controller: responsible for budgeting, accounting, and taxes. Chief Financial Officer (CFO): oversees the treasurer and controller and sets overall financial strategy. Agency Problems: managers, acting as agents for stockholders, may act in their own interests rather than maximizing value. Stakeholders: Anyone with financial interest in the firm. Corporate governance Chapter 2: Financial Market: market where securities are issued and traded. Primary Market: market for the sale of new securities by an organization. primary issue Secondary Market: market in which previously issued securities are traded among investors. secondary transaction Initial Public Offering (IPO): the first issue made by a corporation. Stock Markets: also called equity markets, since stockholders are said to have common equity in a corporation.
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