Term
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Term
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Definition
| involves how companies raise and invest money and manage their financial resources |
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| capital markets and financial institutions |
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Definition
| examines the structure of capital markets, the role of financial institutions, the process of financial intermediation, and how money flows in the economy |
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| investments and valuation |
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Definition
| focuses on valuation techniques and how to value alternative investment opportunities that are provided primarily via financial markets/institutions |
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Definition
| financial markets where issuers and investors buy and sell debt and equity securities |
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| represents an obligation to repay borrowed moneys |
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| represents ownership in a company |
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| return vs risk (prin. 1/10) |
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Definition
| higher returns require more risk, there's a positive relationship between risk and return |
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| market efficiency (prin. 2/10) |
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Definition
| efficient capital markets are tough to beat, prices in markets react quickly to new info |
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| risk preference (prin. 3/10) |
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Definition
| rational investors are risk averse, individual investors prefer less risk to more |
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| supply and demand (prin. 4/10) |
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Definition
| supply and demand drive asset prices in the short-run |
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| corporate finance and governance (prin. 5/10) |
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Definition
| corporate managers should act to maximize shareholder value or common stock |
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| minimizing the cost of investing (prin. 6/10) |
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Definition
| transaction costs, taxes, and inflation are enemies |
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| time value of money (prin. 7/10) |
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Definition
| time and value of money are inversely related, dollar today > dollar tmr |
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| asset allocation (prin. 8/10) |
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Definition
| asset class allocation is very important, decisions to invest in stocks, bonds, or cash is critical |
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| diversification (prin. 9/10) |
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Definition
| asset diversification will reduce risk, spread money around, don't put everything into one basket |
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| investment valuation (prin. 10/10) |
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Definition
| value equals the sum of expected cash flows, discounted for timing and risk |
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Definition
| how corporate mangers should allocate funds of the company to buy or build projects and investments that will be worth more than they cost |
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| how corporate managers should raise money from institutional and individual investors via the sale of debt and equity claims for the company to finance the project |
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| % of the company's profits and cash from operations that the company should reinvest in the business and how much should be returned to shareholders |
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Definition
| value associated with investing in a project |
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| the valuations, planning and managing of corporate investments for a firm |
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Definition
| cost of raising debt and equity capital for the biz |
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Definition
| capital markets in which governments, agencies and municipal entities issue debt securities and corporations issue stocks and bonds to investors |
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Definition
| process in which issuers receive funds directly from the purchasers of stock and bonds in the markets |
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Definition
| process of funds moving from inestors through financial intermediaries to borrowers |
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Definition
| borrows funds from savers/investors by issuing a claim, a savings or checking deposit, or a contract such as an insurance policy or pension obligation and uses those funds to make loans |
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Definition
| minimizing the cost of capital by using the right mix of debt and equity |
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| financial markets/intermediaries |
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Definition
| exist so that excess monies from investors or surplus units can be transferred cheaply and efficiently to biz's, govs., individuals and other entities, or deficit units who have a shortage of funds |
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Term
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Definition
| combination of financial statements and ratios, present value concepts, models of risk and return, and spreadsheet modeling methods |
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