Finance 2
Terms
undefined, object
copy deck
- Sole proprietorship
-
a. Avoids corporate taxes, taxed at personal income
b. Unlimited liability
c. Hard to raise capital
d. Life limited to the owner
e. Avoids Government Regulations - Partnership
-
• General Partners
• Limited Partners: Lose how much you invest in - Corporation
-
f. Owners are separate from managers
g. Requires a lot of administrative paper work to form (bylaws)
h. Shares(ownership)are easily transferable
i. Corporate taxes
j. Easy to Raise Funds
k. Life is not limited to stockholders
l. Disadvantage: Double taxation
m. Disadvantage: A lot of Government regulations - LLC
- (Limited Liability Company)= operate and to be taxed like a partnership but retain limited liability for its owners
- Goal of a firm of management is to?
- Maximize Stock Price
- Conflict of interest in share holders and management is what?
- Relationship is called an agency relationshipÂ…Managerial Compensation, Control of the Firm, and Conclusion
- Primary Market
-
1. Public Offering: Registered with SEC and sold to institutions and investors
2. Private Placement: DonÂ’t have to be registered and sold to private investors. - Which market is considered an auction market
- Wallstreet
- Double Taxation for corporations means?
- Getting taxed twiceÂ…at the time when you pay taxes then if the company holds stock, the dividends are also taxed
- 3 disadvantages of a corporate organization?
- Double taxation, Govt regulations...
- Difference between Income Statement, cash flow statement, Balance sheet is?
- Current Assets
- What is a current assets?
- Has a life less than one year and it will normally convert to cash within 12 months
- Networking capital is?
- Difference between a firmÂ’s current assets and its current liabilities. + is good
- How to calculate average and marginal tax rate different?
- Tax bill/taxable incomeÂ… extra tax you would pay if you earned one more dollar. Page 31
- Cash flow from assets is also known as what?
- Operating cash flow, capital spending, and change in net working capital
- Earning per share is what?
- Net income/total shares outstanding
- Balance sheet Assets are what
- Current or fixedÂ…on left side
- Which is not needed for operating cash flow?
- Expenses associated with the firmÂ’s financing of its assets are not included since they are not operating expenses. (taxes)
- Which is not considered a component of stock holderÂ’s equity?
-
a. Assets
i. Current
ii. Fixed
b. Liabilities
i. Current
ii. Long term - What Quick Ratio:
- Current Assets- Inventory/Current Liabilities
- What is Current Ratio
- Current Assets/Current Liabilities
- What type of Ratio is financial leverage?
-
ShareholdersÂ’ Equity= Assets-Liabilities
Higher the debt, the greater its degree of financial leverage - Equation for Total Turnover
- Cost of goods sold/ Inventory
- ROE/(3 things?) what is it called?
- Return on Equity= Net Income/Assets * Assets/Total Equity
- 5 Ratios
- which ratio can be calculated using only the income statementÂ…Assets are never on income statementÂ…no equity
- Diff. between compound interest, simple interest, annual, interest on interest.
-
CI=interest earned on both the initial principal and the interest reinvested from prior periods
SI=Interest earned only on the original principal amount invested
IonI=Interest earned on the reinvestment of previous interest payments
AI=Every year - Formula for present value interest factor?
- FV (1/((1+r)^t))