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Chapter 1 - Primary Market Market in which new issues of a...

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Chapter 1 - An Introduction to Financial Management Goal of the Firm 1) Profit Maximization . this goal ignores: a) TIMING of Returns (Time Value of Money - Ch. 5) b) UNCERTAINTY of Returns (Risk - Ch. 6) 2) Shareholder Wealth Maximization this is the same as: a) Maximizing Firm Value b) Maximizing Stock Price Legal Forms of Business 2a) General Partnership All partners have unlimited liability. 2b) Limited Partnership Consists of one or more general partners, who have unlimited liability.One or more limited partners (investors) whose liability is limited to the amount of their investment in the business. 2c) Limited Liability Company (LLC) Cross between a partnership and a corporation. Owners have limited liability, but the firm runs and is taxed like a partnership. The Corporation and Financial Markets
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Unformatted text preview: Primary Market Market in which new issues of a security are sold to initial buyers. Secondary Market Market in which previously issued securities are traded. Initial Public Offering (IPO) The first time the firm’s stock is sold to the general public. Seasoned New Issue A new stock offering by a firm that already has stock that is traded in the secondary market. Financial Management Axioms 1) Risk - return trade-off. 2) Time value of money. 3) Cash - not profits - is king. 4) Incremental cash flows count. 5) The curse of competitive markets. 6) Efficient capital markets. 7) The agency problem. 8) Taxes bias business decisions. 9) All risk is not equal. 10) Ethical dilemmas are everywhere in finance....
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