Exam (elaborations)
Financial Management Chapter 1-5 Rutgers exam questions and answers
- Course
- Institution
Financial Management Chapter 1-5 Rutgers exam questions and answers
[Show more]
Content preview
Financial ManagementChapter 1-5 Rutgers
exam questions and
answers
Financial institutions
are businesses that deal primarily in financial
matters (e.g., banks and insurance companies)
Capital budgeting
is the process of planning and managing a firm’s
long-term investments
Ex: •Evaluating the size, timing, and risk of future
cash flows
Capital structure
is the mixture of debt and equity maintained by a
firm
Ex:•How much should the firm borrow (i.e., what
mixture of debt and equity is best)?
•What are the least expensive sources of funds for
the firm?
Working capital management
short-term assets and liabilities
,Three different legal forms of business
organization
1.Sole proprietorship
2.Partnership
3.Corporation
Sole proprietorship
is a business owned by a single individual
Advantages include the following:
•Simple
•Least regulated
•Owner keeps all the profits!
Disadvantages include the following:
•Owner has unlimited liability for business debts
•All business income is taxed as personal income
•Amount of equity that can be raised is limited to
the amount of the proprietor’s personal wealth
•Ownership may be difficult to transfer
Partnership
is a business formed by two or more individuals or
entities
•In a general partnership, all the partners share in
gains or losses, and all have unlimited liability
for all partnership debts, not just some particular
share.
, •In a limited partnership, one or more general
partners will run the business and have unlimited
liability, but there will be one or more limited
partners who will not actively participate in the
business. A limited partner’s liability for business
debts is limited to the amount that partner
contributes to the partnership.
Corporation
a business created as a distinct legal entity
composed of one or more individuals or entities
Advantages include the following:
•Ownership can be readily transferred
•Life of corporation is unlimited
•Limited liability for stockholders
Significant disadvantage includes the following:
•Double taxation, meaning corporate profits are
taxed twice, first at the corporate level when they
are earned and again at the personal level when
they are paid out
Goal of Financial Management
maximize the current value per share of the
existing stock
Add value for Shareholders
Sarbanes-Oxley Act (i.e., "SOX")
Key requirements of SOX include the following:
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller BRAINBOOSTERS. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $15.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
52510 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now