Finance 101: Introduction to Financial Management and Corporate Finance

Vocabulary flashcards covering key terms from the lecture notes on financial management, accounting, and corporate finance.

Wealth maximization

Primary goal of financial managers: maximize the current value of the firm's stock to maximize shareholder wealth.

Financial management

The management of a firm's financial resources, including daily tasks (credit and inventory management) and long‑term risk management to create value.

Accounting

The language of finance; provides financial data through income statements, balance sheets, and cash flow statements used to guide resource allocation.

Income statement

A financial statement that shows revenues minus expenses over a period, yielding net income or loss.

Balance sheet

A financial statement listing assets, liabilities, and shareholders' equity at a specific point in time.

Statement of cash flows

A financial statement that shows cash inflows and outflows from operating, investing, and financing activities over a period.

Financial statements

The trio of reports—income statement, balance sheet, and statement of cash flows—that convey a firm's financial performance and position.

Investments

A subfield of finance dealing with decisions about how to invest funds to earn returns.

Corporate finance

A subfield of finance focusing on capital structure, funding, and long‑term investment decisions within a corporation.

Corporation

A legal entity created by articles of incorporation; owned by shareholders; features limited liability and perpetual life.

Articles of incorporation

The legal document that creates a corporation and defines its rights and limitations.

Limited liability

Shareholders' liability is limited to their initial investment.

Perpetual life

A corporation's life continues beyond any single shareholder; it persists over time.

Shares of stock

Units of ownership in a corporation that represent equity stakes and are issued to raise capital.

Shares outstanding

The total number of shares that are currently issued and held by investors.

Institutional ownership

The portion of a company's shares owned by institutional investors such as pension funds, mutual funds, banks, insurance companies, and hedge funds.

Institutional investors

Organizations that own large blocks of stock, including pension funds, mutual funds, banks, insurance companies, and hedge funds.

Management

The people responsible for running the company and implementing policies to maximize shareholder value.

Wealth maximization

Primary goal of financial managers: maximize the current value of the firm's stock to maximize shareholder wealth.

Financial management

The management of a firm's financial resources, including daily tasks (credit and inventory management) and long
term risk management to create value.

Accounting

The language of finance; provides financial data through income statements, balance sheets, and cash flow statements used to guide resource allocation.

Income statement

A financial statement that shows revenues minus expenses over a period, yielding net income or loss.

Balance sheet

A financial statement listing assets, liabilities, and shareholders' equity at a specific point in time.

Statement of cash flows

A financial statement that shows cash inflows and outflows from operating, investing, and financing activities over a period.

Financial statements

The trio of reports
income statement, balance sheet, and statement of cash flows
that convey a firm's financial performance and position.

Investments

A subfield of finance dealing with decisions about how to invest funds to earn returns.

Corporate finance

A subfield of finance focusing on capital structure, funding, and long
term investment decisions within a corporation.

Corporation

A legal entity created by articles of incorporation; owned by shareholders; features limited liability and perpetual life.

Articles of incorporation

The legal document that creates a corporation and defines its rights and limitations.

Limited liability

Shareholders' liability is limited to their initial investment.

Perpetual life

A corporation's life continues beyond any single shareholder; it persists over time.

Shares of stock

Units of ownership in a corporation that represent equity stakes and are issued to raise capital.

Shares outstanding

The total number of shares that are currently issued and held by investors.

Institutional ownership

The portion of a company's shares owned by institutional investors such as pension funds, mutual funds, banks, insurance companies, and hedge funds.

Institutional investors

Organizations that own large blocks of stock, including pension funds, mutual funds, banks, insurance companies, and hedge funds.

Management

The people responsible for running the company and implementing policies to maximize shareholder value.

The formula for calculating future value, where $FV$ is future value, $PV$ is present value, $i$ is the interest rate per period, and $n$ is the number of periods