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FA - Chapter 1
An overview of Financial Management
15
Business
Undergraduate 2
03/28/2011

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Term
Sarbanes-Oxley Act
Definition
A law passed by Congress that requires the CEO and CFO to certify that their firm's financial statements are accurate.
Term
Proprietorship
Definition
An unincorporated business owned by one individual.
Term
Partnership
Definition
An unincorporated business owned by two or more persons.
Term
Corporation
Definition
A legal entity created by a state, separate and distinct from its owners and managers, having unlimited life, easy transferability of ownership, and limited liability.
Term
S Corporation
Definition
A special designation that allows small businesses that meet qualifications to be taxed as if they were a proprietorship or a partnership rather than a corporation.
Term
Limited Liability Company (LLC)
Definition
A relatively new type of organization that is a hybrid between a partnership and a corporation.
Term
Limited Liability Partnership (LLP)
Definition
Similar to an LLC but used for professional firms in the fields of accounting, law, and architecture. It has limited liability like corporations but is taxed like partnerships.
Term
Shareholder Wealth Maximization
Definition
The primary goal for managers of publicly owned companies implies that decisions should be made to maximize the long-run value of the firm's common stock.
Term
Intrinsic Value
Definition
An estimate of a stock's "true" value based on accurate risk and return data. The intrinsic value can be estimated but not measured precisely.
Term
Market Price
Definition
The stock value based on perceived but possibly incorrect information as seen by the marginal investor.
Term
Marginal Investor
Definition
An investor whose views determine the actual stock price.
Term
Equilibrium
Definition
The situation in which the actual market price equals the intrinsic value, so investors are indifferent between buying or selling a stock.
Term
Business Ethics
Definition
A company's attitude and conduct toward its employees, customers, community, and stockholders.
Term
Corporate Raider
Definition
An individual who targets a corporation for takeover because it is undervalued.
Term
Hostile Takeover
Definition
The acquisition of a company over the opposition of its management.
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