Primary goal of financial management |
maximize the current value per share of the existing stock |
Capital Budgeting |
the process of planning and managing a firm’s long-term investments |
Capital Structure |
the mixture of debt and equity maintained by a firm |
Working Capital Management |
the managing of short-term assets and liabilities |
A good example of a Pure discount loan, an Interest-only loan, and an Amortized loan is |
Treasury bill, a corporate bond, and mortgage loan respectively |
capital structure decision |
determining how much debt should be assumed to fund a project |
Sole proprietorship |
owner is personally liable for all company’s debts |
Amortized loans must have which one of these characteristics? |
Either equal or unequal principal payments over the life of the loan |
An example of capital budgeting decision is deciding |
Whether or not to purchase a new machine for the production line |
What will increase the present value of an amount to be received sometimes in the future |
A decrease in the interest rate |
Working Capital management decisions include determining |
The minimum level of cash to be kept in a checking account |
Ratios that measures a firms liquidity are known as …. ratios |
Short-term solvency |
Seconds markets |
securities are bought and sold after the original sale |
Dealer Markets (OTC) |
Electronic trading |
Auction markets (exchanges) |
Physical locationMatch buyers and sellersNYSE (fewer firms, but much larger firms) |
Primary markets |
markets in which corporations raise capital by issuing new securities |
Liquidity Ratios |
Measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. |
Debt Management Ratios |
degree to which a firm can meet it’s long-term financial obligations |
asset management ratios |
A set of ratios that measure how effectively a firm is managing its assets. |
Profitability Ratios |
measure the income or operating success of a company for a given period of time |
Market Value Ratios |
Ratios that relate the firm’s stock price to its earnings and book value per share. |