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Cards In This Set
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The process of planning and managing a firm's long-term investments
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Capital budgeting
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When does an agency problem usually exist?
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Management being frequently separated from ownership
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A market where all new issues of debt and equity are offered to the public
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Primary market
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How are limited liability companies taxed and protected from liabilities?
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Taxed once (partnership), limited liability (corporation)
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What is the primary goal of a financial manager?
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To maximize shareholders' wealth
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The mixture of debt and equity a firm has to finance its operations
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Capital structure
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A firm's current assets and current liabilities
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Working capital
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How is a corporation taxed and protected from liabilities?
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Tax disadvantaged, liability advantaged
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How is a partnership and a sole proprietorship taxed and protected from liabilities?
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Tax advantaged, liability disadvantaged
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A breakdown of ROE and its three component parts
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Du Pont identity
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The maximum growth rate achievable if the firm maintains a constant debt-equity ratio without issuing any additional equity
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Sustainable growth rate
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What does a high price-earnings ratio mean?
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The firm is expected to grow significantly
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Relationships computed from a firm's financial information and used for comparison purposes
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Financial ratios
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The profit margin is the amount of net profit earned for every dollar of what?
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Sales
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What ratio indicates how long a firm can pay its bills given its current cash balance?
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Cash ratio
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