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Unformatted text preview: There will be a review session on Friday, December 9, 1:30-3:30 in MacK 228. All chapters, but 1,2,3,4,5,6,7,8,9 Main focus on, 10, 11, 12, 13, 14, 15, 16 and 23. CHAPTER 1: THE FIRM AD THE FINANCIAL MANAGER 1.1 ORGANIZING A BUISNESS- There are 3 main forms of businesses; 1. Sole proprietorships 2. Partnerships ( general and limited) 3. Corporations And 4. Hybrid forms (LLP, LLC, PC etc) SOLE PROPRIETORSHIPS - Are the primary forms of a business that is easy to form and dissolve PARTNERSHIPS- Are the dominant forms for specialized business like medical clinics and law firms CORPORATIONS Corporation: business owned by shareholders who are not personally liable for the business’s liabilities Limited liability: principle that the owners of the corporation are not personally responsible for its obligations - Corporation has limited liability - Shareholders are owners, but the corporations are run by employees led by the CEO- The separation of ownership and control adds flexibility to the corporation But it also creates agency problems - The dominant form of business in modern day More than 88% of business transactions are done by corporation - CHAPTER 2: FINANCIAL MARKETS AND INSTITUTIONS 2.1 WHY FINANCE MATTERS - modern financial markets and institutions contribute to growth firm and productivity of overall economy - financing can occur through several means; loans through friends and family through contracts with its customers selling shares to other companies government sponsored investment funds o once public company, many other sources of funds could be obtained such as; selling more shares to public in follow- on offers issuing more share- access to financing is vital for growth and profitability - modern financial system offers financing in many different forms , that is dependent on; company’s age its growth rate nature of it’s business 2.2 THE FLOW OF SAVINGS TO CORPORATION Financial market : a physical or network oriented market where financial securities are issued and traded Primary market: a new issue of stocks or bonds is known as a primary issue. The market where these are traded is the primary market. Secondary market: the sales and purchases of securities existing issues among market participants is called t he secondary transaction. The markets where this happened is called the secondary market. Chapter 3 CHAPTER 4- THE TIME VALUE OF MONEY - Companies invest in hopes to receive even more than they invested - Companies pay for their investments by raising money – and in the process assume liabilities - All financial decisions ( of assuming liabilities) require comparisons of cash payments at different dates - The time value of money describes the relationship between the value of the dollar today and the value of the same dollar in the future o How much do you need to invest today to produce a specified sum of money in the future ?...
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This note was uploaded on 02/13/2012 for the course ECON 2560 taught by Professor Bower during the Spring '11 term at University of Guelph.
- Spring '11