Chapter 5: Firms, the Stock Market, and Corporate Governance 1. 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 corporation 3. Corporation: A legal form of business that provides owners with protection from losing more than their investment should the business fail 4. Asset: Anything of value owned by a person or a firm 5. Limited Liability: The legal provision that shields owners of a corporation from losing more than they have invested in the firm 6. Separation of ownership from control: A situation in a corporation in which the top management, rather than the shareholders, control day-to-day operations 7. Principal-agent problem: A problem caused by an agent pursuing his own interests rather than the interest of the principal who hired him 8. Indirect finance: A flow of funds from savers to borrowers through financial intermediaries such as banks. Intermediaries raise funds from
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This note was uploaded on 06/08/2011 for the course ECON 1 taught by Professor Bergstrom during the Spring '07 term at UCSB.