Forms of Business
owners in a company
shareholders
provides a summary of the inflows and outflows of cash during the period
Statement of Cash Flows
The change in the amount of interest you pay or receive on a cash flow, vs. the stated rate you are given
APR vs EAR
Market Rate
Higher risk is associated with what?
Higher Return
business formed by one individual
sole proprietorship
Purchasing assets, repaying debts
Cash outflows
Type of interest that only earns interest on the original principal amount
Simple Interest
Financial Markets that are used to raise capital by companies. (Two answers)
Capital Markets - long term debt
Money Markets - short term debt
Risk that is unavoidable to all investors
Systematic Risk aka Market Risk
no limited liability protection for owner, harder to raise capital
Disadvantages of sole proprietorship from of business
Shows all revenues and expenses over a period
Income Statement
Payment repeated at the same frequency for the same amount every time
An annuity
Financial markets where securities (stocks and bonds) are sold to, or bought by investors. (Two answers)
Primary Market - sold by Investment banks
Secondary Market - sold by investors
Risk that can be avoided by diversifying your stock portfolio
Diversifiable Risk aka Firm Specific Risk
Double taxation of profits, lots of governmental regulation
Disadvantages of corporate form of business
Shows the balances of all assets, liabilities, and owners equity at one date in time
Balance Sheet
Type of interest that earns interest on principal amount + interest on interest
Compounding interest
Amount of interest paid to the owners of the bond each coupon period
Coupon Rate
A measure of systematic risk, this variable tracks how your portfolio moves in relation to the overall stock market
Beta
managers having different interests for the business than the owners/shareholders
Agency Conflict
Making a profit for the year, selling fixed assets, obtaining funding
Annuity with payments at the beginning of the year
Annuity Due
middle man that buys stock from a company who is having an IPO and sells it to the investors
Investment Banks
A measure of total risk, this variable measures the variation of returns from a middle point
Standard Deviation