Introduction to Business Finance and Financial Statements

These flashcards cover key concepts and terms related to business finance and financial statements, necessary for understanding corporate finance and preparing for exams.

Corporate Finance

The management of the financial resources available to a business.

Capital Budgeting

The process of deciding what long-term investments or projects a business should take on.

Capital Structure

The mix of debt and equity used to finance a firm's assets.

Working Capital Management

The management of a firm’s short-term assets and liabilities.

Sole Proprietorship

A business owned by one person where the owner keeps all profits but has unlimited liability.

Partnership

A business owned by two or more persons with shared profits and responsibilities.

Corporation

A legal entity distinct from its owners that can own assets, incur liabilities, and sell shares.

Liquidity

The ability to easily buy or sell an asset without significantly affecting its price.

Agency Problem

The conflict of interest that arises when agents (managers) do not act in the best interests of principals (shareholders).

Income Statement

A financial statement that measures a company's performance over a specified period, detailing revenues and expenses.

Return on Assets (ROA)

A financial metric that indicates how profitable a company is relative to its total assets.

Market Capitalization

The total market value of a company's outstanding shares of stock.

Profit Margin

A profitability ratio that measures the percentage of revenue that exceeds total expenses.

Earnings per Share (EPS)

A financial ratio that represents the portion of a company's profit allocated to each share of common stock.

P/E Ratio

A valuation ratio calculated by dividing the market price per share by earnings per share.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.

Financial Manager

An individual responsible for managing the financial activities of a firm and making investment decisions.