Introduction to Financial Management

A set of vocabulary flashcards covering key concepts of financial management, including various areas of finance, financial managers' roles, business organizations, and financial calculations.

Corporate Finance

Focuses on the financial decisions made within a company.

Investments

Deals with financial assets like stocks and bonds, valuation, risk-return relationship, and asset allocation.

Financial Institutions

Companies specializing in financial matters, including banks, credit unions, and insurance companies.

International Finance

Focuses on financial activities across borders, involving exchange rates and political risk.

Fintech

Combination of technology and finance; involves companies using internet and software for financial services.

Chief Financial Officer (CFO)

Top financial manager overseeing treasurer and controller, responsible for financial decision-making.

Capital Budgeting

Determining long-term investments or projects for a business.

Capital Structure

Determining how to finance the company's assets using debt or equity.

Working Capital Management

Management of a firm's day-to-day finances.

Sole Proprietorship

Business owned by one person with easy startup and unlimited liability.

Partnership

Business owned by two or more people with shared profits and unlimited liability.

Corporation

Legal entity separate from its owners, providing limited liability and easier ownership transfer.

Agency Problem

Conflict of interest in corporations between shareholders and managers.

Double Taxation

Corporate income is taxed and then dividends paid to shareholders are taxed again.

Goal of Financial Management

To maximize the current value per share or market value of stockholders equity.

Sarbanes-Oxley Act 2002

Strengthened regulations against accounting fraud and financial malpractice.

Financial Markets

Facilitate cash flow between firms and investors through securities.

Primary Market

Where a firm issues securities for the first time.

Secondary Market

Where existing securities are traded between investors.

Balance Sheet

Snapshot of a company's assets and liabilities at a specific time.

Net Working Capital

Current Assets minus Current Liabilities, indicating financial health.

Income Statement

Measures financial performance over a specific period, revealing net income.

Marginal Tax Rate

Tax percentage applied to the next dollar of taxable income.

Average Tax Rate

Total tax paid divided by total taxable income.

Cash Flow

Shows how cash is generated from assets and distributed to financing sources.

Annuity

Finite series of equal payments made at regular intervals.

Perpetuity

Infinite series of equal payments.

Discounted Cash Flow (DCF) Valuation

Method to value an investment using expected future cash flows.