WGU C214|UPDATED&VERIFIED|100% SOLVED|GUARANTEED SUCCESS

Corporate Finance focuses on financial decision making by a firms management Investments various types of financial instruments (stocks, bonds, etc) Banking or Financial Institutions make money by paying depositors a smaller interest rate than the interest rate charged to borrowers Treasury Securities generally bonds that are issued by the US government Corporate Bonds firms borrowing from the public Stocks a share of ownership in a company Primary financial markets markets where securities are first issued Syndicate a group that is temporarily formed to handle a bond or stock issue: generally large investment bank or institutional investors Underwriter responsible for determining the value of the security; may purchase all the securities & then resale to investors Competitive sale underwriters submit bids offering highest price/lowest interest rate; underwriter resales a slightly higher price Negotiated sale underwriters submit bids, go thru interview to be selected Secondary financial markets where securities are traded after the initial offering (stock market) Auction market has a physical location & prices are determined by the highest price an investor is willing to pay (New York Stock Exchange) Dealer market no physical location- securities are bought & sold thru a network of dealers that trade for themselves; multi dealers per stock (NASDAQ) Role of financial markets they reduce the cost of borrowing from the public or selling ownership to the public Role of Specialist (NYSE) or Dealers provide liquidity for a fair & orderly market; may increase the spread to do so (charge a lower price to seller and a higher price to buyer) Financial market liquidity the ease of trading in the market (high frquency traders) Market orders time sensitive; sales at current bid price/buys at current asking price when order is placed-immediately Limited orders price sensitive; sell occurs when price of stock matches order price Role of price convet information to consumers; affect incentives &affect the distribution of income Dollar Returns Pt - Pt-1 + CFt (Pt= sold price, Pt-1=bought price, CFt=cash flow-coupons for bonds/dividians for stocks) Percentage Returns Pt - Pt-1/Pt-1 + CFt/Pt-1 x 100 (1.2) (figure for dollar return and divide into bought price) Goal of company/firm to maximize shareholder value or maximize profit Agency costs costs that are incurred when management doesn't act in the best interests of shareholders Profit maximizarion the potential effect of focusing soley on profits Accounting is backward-looking and risk free Finance is forward-looking and involes massive uncertainty Income Statement show results of operation over time; revenues - expenses = net income Balance Sheet a "snap shot" of a firm's assests & financing at a paticular point in time; Assets= Liabilities + Owner's Equity Statement of Cash Flows tracks all cash in and out of the firm Cash Accounting cash in =revenue; cash out=expense Accrual Accounting revenues are recognized when the earnings process is complete; expenses are "matched" to recongized revenues Cash-based income an informal metric based on cash in & cash out of the firm Income for tax purposes based on the government's definition of income, this is the amount of income the government will tax Accounting income the income calculated using accrual accounting (aka, GAAP); best & most complicated metric for understanding the operations of the firm