Chapter 5: Firms, the Stock Market, and Corporate Governance1.Sole proprietorship: A firm owned by a single individual and not organized as a corporation.2.Partnership: A firm owned jointly by two or more persons and not organized as a corporation3.Corporation: A legal form of business that provides owners with protection from losing more than their investment should the business fail4.Asset: Anything of value owned by a person or a firm5.Limited Liability: The legal provision that shields owners of a corporation from losing more than they have invested in the firm6.Separation of ownership from control: A situation in a corporation in which the top management, rather than the shareholders, control day-to-day operations7.Principal-agent problem: A problem caused by an agent pursuing his own interests rather than the interest of the principal who hired him8.Indirect finance: A flow of funds from savers to borrowers through financial intermediaries such as banks. Intermediaries raise funds from
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