Intro to finance 1

18 flashcards · Other · by Daniel F.

1. market value is measured by

   present value of cashflows

2. forms of business

   sole proprietorship / partnership corporation unlimited life easy to transfer ownership limited liability increased access to funding

3. financial markets by maturity times

   by maturity of assets money market - < 1yr capital market - > 1yr

4. financial markets by owner of assets

   primary market corporations give stocks and bonds to investors for cash interest payments are fix while dividends are not secondary market investors trade among themselves

5. managerial vs shareholder goals

   type 1 agency problem goals are in set of contracts may conflict (agency problems) financial goal to maximize shareholder's wealth managerial goal to maximize own benefit

6. controlling vs minority goals

   type 2 agency problem

7. Corporate governance

   solution to agency problem monitor management behavior (agency costs) devise the contracts so that the goals align managerial compensation plans threats of termination threats of takeover

8. What is corporate finance

   Capital Budgeting (investing) what long term investments to make timing: what cash outflows today generate future cash flows Capital Structure (financing) where to get long-term financing from timing: cash inflow today and cash outflow in the future to meet obligations Working capital management (liquidity) how to manage everyday activities timing: balance of cash inflows and outflows in the short terms

9. Goal of financial management

   maximize the value of market value

10. CSR

    paris agreements ESG - environmental, social, governance

11. financial management vs financial analysis

    Financial Management - Keep track of the cash that comes in & goes out of the business. Financial Analysis - Cash flow is the main valuation input of the stock of the company.

12. Financial statements

    balance sheet income statement

13. balance sheet

    Assets - concerned with capital budgeting current / short term long term with depreciation Liablities - concerned with Capital Structure current / short term long term with Stockholders equity

14. Net working capital (NWC)

    Current assets - current liabilities working capital management

15. clash flows comes from

    operating activities investing activities financing activities

16. income statement

    Total sales (cost of sales) = Gross porfit (selling general and admin expenses) (r&d) (depreciation and amortization) = Operating income Other income == Earnings Before Interest and Taxes (EBIT) (Interest income expenses) = Pretax income (Taxes) == Net income

17. Cashflow from operating activities (operating cashflow)

    to get actual cashflow that happened we need to remove the not real cashflows depreciation not real outflow interest expense is reported elsewhere we subtract ΔNWC to correct for sales and purchases done on credit net income + depreciation + interest expense - change in net working capital EBIT + depreciation - taxes - change in net working capital

18. dividends are paid from

    net income