One Main Goal
maximize value of firm (current market value)
Free Cash Flows
revenues – op expenses – new investments (cap expenses)
Capital Budgeting
process of planning and managing a firms long term investments
capital structure
the mixture of debt and equity maintained by a firm
working capital
a firm’s short term assets and liabilities
sole proprietorship
business owned by a single individual
Advantages of the corporation form of organization
-Ability to raise large sums of equity capital
-ease of ownership transfer
-limited liabliity for all owners
the potential conflict of interest between a firm’s owners and its management
agency confilct
the primary goal of financial management is to maximize which one of the following for a firm
market value of existing stock
Three “levers” for return equity
-profit margin
-total asset turnover
-equity multiplier