EXAM 1 STUDY GUIDE - MGMT 310 Financial Management Spring...

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MGMT 310 – Financial Management Spring 2012 Exam 1 Study Guide Financial Management Decisions Capital Budgeting: the process of planning and managing firms long-term investments. Capital Structure: the mixture of debt and equity maintained by the firm. (How should we raise funds to invest in the projects we have chosen?) Working Capital: management of short-term assets and liabilities. (How do we manage our day-to-day tasks?) Types of Business Organizations Proprietorship vs. Corporation Limited life Unlimited life Hard to transfer Easier to transfer Unlimited liability (Stockholders) Limited liability (Stockholders) Difficult to raise funds Easier to raise funds Easy to start up More complicated to start up Only taxed once Double taxation Owner is manager Agency problems in large corporations Financing Sources Bonds: Bondholders are promised fixed future payments which the firm is legally bonded to make. Common Stock: Holders of common stock obtain payoffs only when other claims are met and, as such, are “owners” of the firm with the right to choose the management. Primary vs. Secondary Markets Primary: transactions raise money for the corporations and can have public offerings or private placements. Secondary: transactions between owners, no money to corporation. Basic Accounting Identity (Balance Sheet)
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EXAM 1 STUDY GUIDE - MGMT 310 Financial Management Spring...

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