definitions chptrs 1-4 - Goal of the firm Maximize...

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Goal of the firm Maximize Shareholder wealth, which maximizes firm value, which maximizes stock price Sole proprietorship A business owned by a single individual – owner is entitled to profits ,but also losses, no limit on liability General partnership Two or more owners. Each owner is fully responsible for liabilities. Limited Partnership Partnership in which one or more partners has limited liability (up to the amount of capital invested in the business)
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Corporation A business that functions separate and apart form its owners. All owners have limited liability S-corporation Provides limited liability, but taxed like a partnership (LLC) Limited liability corporation Provides limited liability, but taxed like a partnership. But more flexible than an S-corporation Public Offering Securities are made available to all individual and institutional investors
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Private Placement Securities are offered and sold directly to a limited number of investors Venture capital firm An investment firm that provides money to business start-ups Primary market Corporation receives money by selling new securities, often to an investment bank Secondary market Investors buy and sell existing securities
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Initial public offering (IPO) The first time a company issues its stock to the public Seasoned equity offering (SEO) The sale of additional stock by a company whose shares are already publicly traded Money Market Market for short term (less than 1 year) debt instruments – treasury bills, negotiable CDs, commercial paper Capital market Market for long-term financial instruments – loans, stocks, bonds
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Spot Market Market where something sells today == also called the cash market Futures Market Market where you can buy or sell something at some future date. – price quantity and date are set Exchange/Organized Securities Exchange Physical location Formal organization for buying and selling securities – NYSE(largest in the world), AMEX, regional exchanges Over-the-counter market All security markets except organized security exchanges. A network of brokers and dealers linked by computer – NASDAQ
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NASDAQ An electronic stock market , where all trading takes place
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