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Capital Budgeting
The area of finance that involves deciding what long-term investments a firm should undertake.
Capital Structure
The decisions regarding how a firm raises money to fund its long-term investments.
Working Capital Management
The area of finance that deals with managing cash flows in day-to-day operations.
Sole Proprietorship
A business owned and managed by a single individual, responsible for all profits and debts.
General Partnership
An association of two or more individuals who come together to operate a business for profit, with unlimited liability.
Limited Partnership
A type of partnership where at least one partner has unlimited liability, while other partners have limited liability.
Corporation
A legal business entity that separates the owners from the business, providing limited liability to its shareholders.
Agency Problem
Conflicts of interest that arise between the management of a firm and its shareholders.
Principal-Agent Problem
The conflict that exists when managers (agents) do not act in the best interest of the shareholders (principals).
Opportunity Cost
The value of the next best alternative that is foregone as a result of making a decision.
Profit vs. Cash Flow
Profit is an accounting measure of performance, while cash flow represents actual cash available for spending.
Financial Manager
An individual responsible for managing a firm's finances, including investment decisions, financing decisions, and cash management.
Market Prices Reflect Information
Investors respond to new information by buying and selling, thus prices adjust to reflect what is known.
Double Taxation
The taxation of corporate earnings at both the corporate level and again at the individual level when dividends are paid.
Incentives
Motivators that affect the actions of managers, which can conflict with the interests of the firm's owners.
Ethics in Finance
Trust and fairness are fundamental to doing business, and ethical lapses can lead to significant consequences.
CFO (Chief Financial Officer)
The executive responsible for overseeing the financial activities of a firm.
Treasurer
The officer responsible for managing a firm's financing activities and cash management.
Financial Controller
The officer responsible for corporate reporting and general accounting within the firm.
