FIN 300 Study Guide - Midterm Guide: Net Income, Retained Earnings, Income Statement

• School: Ryerson University
• Department: Finance
• Course: FIN 300
• Professor: Laleh Samarbakhsh

Document Summary

Agency problems: resulting from the separation of management and ownership, (cid:272)o(cid:374)fli(cid:272)ts of i(cid:374)terest (cid:271)etwee(cid:374) the fir(cid:373)"s owners (principals) and its managers (agents) ways: compensation plans: firm stock and options, board of directors, threat of takeovers, specialist monitoring. Primary market: market for the sale of new securities by corporations. Secondary market: market in which already issues securities are traded among investors. Market value = discounted cash flow / time value of money. Net income is split between cash dividends and additions to retained earnings. Operating activities: cf that results from everyday activities of producing and selling. Investing activities: net spending on fixed assets (purchases of fixed assets less sales of fixed assets) Financing activities: net new cash inflow from bondholders and shareholders (net new borrowing + net new equity = dividends paid) Cash flow from assets= cf creditors + cf shareholders. Cf assets = ocf net capital spending additions to net working capital.