Term
| what is a sole proprietor? |
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Definition
| Sole owner of a business that has no partners and no shareholders. THe proprietor is personally liable for all the firm's obligations. |
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Term
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Definition
| Business owned by two or more persons who agree to abide by a partnership agreement. |
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Term
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Definition
| Business organized as a separate legal entity owned by stockholders. |
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Term
| What is a limited liability? |
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Definition
| A debt such that the owners of it are not personally responsible (e.g. what's held by the owners of a corporation) |
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Term
| For a sole proprietorship, who owns the business? Are managers and owner(s) separate? What is the owner's liability? Are the owner and business taxed separately? |
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Definition
For a sole proprietorship,
the manager owns the business,
manager and owner are not separate,
owner's liability is unlimited,
the owner and business are not taxed separately |
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Term
| For a partnership, who owns the business? Are managers and owner(s) separate? What is the owner's liability? Are the owner and business taxed separately? |
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Definition
For a partnership,
partners own the business,
managers and owners are not separate,
owner's liability is unlimited,
the owner and business are not taxed separately |
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Term
| For a corporation, who owns the business? Are managers and owner(s) separate? What is the owner's liability? Are the owner and business taxed separately? |
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Definition
For a corporation,
shareholders own the business;
managers and owner(s) are usually separate;
owner's liability is limited;
the owner and business are taxed separately. |
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Term
| How many public companies are in the U.S.? |
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Definition
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Term
| How do corporations incur double taxation? |
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Definition
| Corporations pay tax on their profits, and shareholders pay tax on any dividends that they receive from the company. |
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Term
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Definition
| A Real asset is used to produce goods or services. |
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Term
| What is a financial asset? |
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Definition
| Claims to the income generated by real assets. They are also called securities. |
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Term
| What is difference between financial assets and securities? |
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Definition
| "Securities" usually refers to financial assets that are widely held, not for not for less public financial assets such as an IOU from your brother. |
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Term
| What is capital structure? |
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Definition
| The mix of long-term financing. |
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Term
| What is a corporation's treasurer responsible with? |
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Definition
| Treasurer is responsible for financing, cash management, and relationships with banks and other financial institutions? |
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Term
| What is a a corporation's controller responsible for? |
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Definition
| Controller is responsible for budgeting, accounting, and taxes. |
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Term
| what is a corporation's chief financial officer (CFO) responsible for? |
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Definition
| CFO is responsible for overseeing the treasurer and controller and setting the overall financial strategy. |
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Term
| Who is a stakeholder of a firm? |
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Definition
| Anyone with a financial interest in the firm. |
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Term
| What is a financial market? |
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Definition
| Market where securities are issued and traded. |
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Term
| What is a primary market? |
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Definition
| Market for the sale of new securities by corporations. |
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Term
| What is a secondary market? |
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Definition
| Market in which previously issued securities are traded among investors. |
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Term
| What is a fixed-income market? |
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Definition
| Market for debt securities. |
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Term
| What is a capital market? |
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Definition
| Market for long-term financing |
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Term
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Definition
| Market for short-term financing (less than one year) |
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Term
| What is a financial intermediary? |
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Definition
| An organization that raises money from investors and provides financing for individuals, corporations, or other organizations. |
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Term
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Definition
| A mutual fund pools the savings of many investors and invests in a portfolio of securities. |
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Term
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Definition
| Investment plan set up by an employer to provide for employees' retirement. |
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Term
| What is a financial institution? |
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Definition
| A bank, insurance company, or similar financial intermediary. |
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Term
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Definition
| The ability to sell or exchange an asset for cash or short notice. |
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Term
| What is the cost of capital? |
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Definition
| Minimum acceptable rate of return on capital investment. |
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Term
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Definition
| Financial statements that shows the firm's assets and liabilities at a particular time. |
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Term
| What is the shareholder's equity equal to? |
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Definition
Shareholder's equity
=
Total assets
-
Total liabilities |
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Term
| What are the generally accepted accounting principles (GAAP)? |
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Definition
| Procedures for preparing financial statements. |
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Term
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Definition
| net worth of the firm according to the balance sheet. |
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Term
| What is the income statement? |
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Definition
| Financial statement that shows the revenues, expenses, and net income of a firm over a period of time |
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Term
| What is the difference between a company's profits and cash flow? (pg. 51) |
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Definition
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Term
| What is the statement of cash flows? |
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Definition
| Financial statements that shows the firm's cash receipts and cash payments over a period of time |
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Term
| What is the marginal tax rate? |
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Definition
| Additional taxes owned per dollar of additional income |
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Term
| What is the average tax rate? |
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Definition
| Total taxes owed divided by total income |
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Term
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Definition
| Amount to which an investment will grow after earning interest. |
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Term
| What is compound interest. |
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Definition
| Interest earned on interest |
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Term
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Definition
| Interest earned only on the original investment; no interest is earned on interest |
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Term
| What is the present value of a cash? |
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Definition
| Value today of a future cash flow; equals future value after t periods divided by (1+r)^t |
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Term
| What is the discount rate? |
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Definition
| Interest rate used to compute present values of future cash flows |
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Term
| What is the discount factor |
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Definition
| Present value of a $` future payment |
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