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| A tangible object with value derived from the service it provides such as a house or a car. |
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| Stocks and bonds. More generally a document giving its owner a claim to certain future cash flows. Stocks base that claim on ownership (equity), while bond base it on debt. Some, but not all, ________ ________ are securities. |
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| A financial asset representing a share of ownership of a corporation. Entitles the owner to dividends if any are paid. They also entitle the owner to vote for directors and on certain key proposals. |
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| An investment vehicle in ehich investors contribute to a fund that uses their pooled money to invest in stocks, bonds, and other financial assets. The fund owns the assets, whle the investors own shares of the fund. |
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| Markets in which financial assets are traded - for example, the stock market. |
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| A person licensed to assist investors in buying and selling securities for a commission. |
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| Chief Financial Officer (CFO) |
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| The corporate executive in charge of the finance department is called the _____ _____ _____. |
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| The executive in charge of external financing in most companies. They generally report to the CFO. |
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| The executive in charge of the accounting function in most countries. They generally report to the CFO. |
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| An asset backing a loan. In the event of a default the _______ becomes the property of the lender to satisfy the obligation. |
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| Double Taxation of Earnings |
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Definition
| The primary financial disadvantage of the corporate form. A corporation's Earnings are subject to corporate tax when earned and personal tax when paid to stockholders as dividends. |
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| Generally, a guarantee made by the owner of a small business when a loan is made to the business. The owner pledges his or her personal credit in addition to that of the company. _________ ________ circumvent the limited liability feature of the corporate form in the context of lending to small businesses. |
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| A corporate form in the tax code that gives small businesses some of the benefits of both the traditional corporation and the proprietorship. They escape the double taxation of earnings. |
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| In corporations, managers are the agents of stockholders and are often able to take the advantage of the relationship by diverting corporate resources to their own use. Excessive pay is the primary example. The costs associated with controlling the ________ _________ are agency costs. |
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| An ______ is hired by a principal and given decision-making authority. |
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| Anyone owed money by a business, including lenders, vendors, employees, or the government. |
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| A relationship between two parties in which one (the principal) employs the other (the agent) in a decision-making capacity. |
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| A debt in which the principal is repaid over the life of the loan rather than in a lump sum at the end. |
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| Investing only in the securities of companies that meet some ethical criteria in their operations such as being environmentally friendly or not discriminating in hiring or Promotion. |
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| A somewhat archaic term for financial theory emphasizing the field's roots in Economics. |
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| An advantage of the corporate form. Stockholder liability for the actions of a company is limited to the value of the stock. That is, a suit against the corporation cannot be made against a stockholder simply because he is an owner. |
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| Limited Liability Company (LLC) |
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Definition
| A relatively new corporate form combining certain advantages of a corporation with the tax treatment of a partnership. Avoids double taxation of corporate earnings. |
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| A systematic approach to valuing securities, especially stocks, by studying an issuing firm’s business and industry. They play an important role in the financial industry. |
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| A systematic process to determine the price at which a security should sell in financial markets. |
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| Widely Held Company A corporation whose ownership is distributed over a large number of people with no single individual or group having a significant proportion. |
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