FIN 380 Final Study Guidefinal

FIN 380 Final Study Guidefinal - FGB 380 Common Final Exam...

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The final exam consists of 60 multiple choice and/or true false questions worth 2.5 points each. The 60 assessment items may include, but are not limited to the following: 1. The goal of the financial manager Chapter 1 Maximize stockholder’s wealth 2. Legal forms of business organization, with specific emphasis on the advantages/disadvantages of corporations Sole Proprietorship: a business owned by one individual (greatest in number of the forms) Advantages: Easiest to start, least regulated, single owner gets all profits, taxed as personal income Disadvantages: Limited to life of owner, equity capital limited to owner’s personal wealth, unlimited liability, difficult to sell ownership interest Partnership: Similar to sole proprietorship, except the business has more than one owner. Advantages: more capital available and relatively easy to start, taxation is simple (each owner reports their percentage of income Disadvantages: unlimited liability extends to both partners (joint and severally liable), difficult to raise capital, difficult to transfer ownership NOTE: A limited partnership limits the partners to their investment, but one partner has to be unlimitedly liable Corporation: a separate legal entity that exists apart from its owners (shareholders or stockholders). Most important in total sales, assets, profits, and contributions to national income. Advantages: limited liability, unlimited life, separation of owners/management, transfer of ownership is easy, easier to raise capital Disadvantages: separation of owners/management, double taxation (corporate income and dividends paid are both taxed) S Corporation: The stockholders of the form maintain the limited liability of a corporation but are taxed as a partnership. Limited Liability Corporation (LLC): Cannot carry on certain service businesses (law, medicine, and accounting), provides limited personal liability, owners are members and can be other corporations, members run the company or use outside management groups 3. Financial market participants, trading, and listing Chapter 1 Market participants: savers and businesses who need capital Trading: most transfers occur through specialized financial institutions brought together in financial markets (those with funds are available to invest in the companies who need it) Types of Markets: Primary: securities are issued by firms to their first investors Secondary: where previously purchased issued securities are traded between investors Dealer: A secondary market called an over-the-counter market. The dealer is involved in one side of the other of every trade. Ex. NASDAQ Organized/Auction: Secondary market in which the market occupies a physical location. Brokers match and sell orders without actually owning the securities involved (ex. NYSE) 4. Basic financial statements (construction and interpretation, with special emphasis on dividends, addition to retained earnings) Chapter 2 Balance Sheet: Snapshot of firm’s assets and liabilities at a given point in time. Assets are what a
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FIN 380 Final Study Guidefinal - FGB 380 Common Final Exam...

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