Key Principles of Finance and Corporate Governance

These flashcards cover key concepts from the lecture notes on finance and corporate governance, highlighting important definitions and principles.

Financial Reporting

The aim of financial reports is to help all parties associated with an organisation make decisions by providing information about the financial position and the performance of an entity.

International Accounting Standards Board (IASB)

An organization that sets International Financial Reporting Standards (IFRSS) to harmonize standards for international accounting.

Corporate Governance

The system by which companies are directed and controlled, involving boards of directors responsible for strategic aims and reporting to shareholders.

'Comply or Explain'

A requirement allowing boards to determine how they comply with a governance code, provided they explain any deviations to shareholders.

Board Leadership

A principle that emphasizes the need for an effective board to promote long-term success and generate value for shareholders.

Agency Theory

A theory that explains the conflicts of interest between owners (principals) and managers (agents), leading to potential agency costs.

Maximization of Shareholder Wealth

The objective in market-based financial systems where company's goal is to maximize the wealth of its shareholders.

Capital Markets

Financial markets that serve as performance monitors for publicly quoted companies, providing continuous assessment and valuation of firms' securities.

Determinants of Value

Factors that influence the intrinsic value of an asset based on the present value of its expected returns.

Economic Value Added (EVA)

A measure used to evaluate management performance by comparing net operating profit adjusted for taxes to the firm's total cost of capital.