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FIN 300 Study Guide - Final Guide: Earnings Before Interest, Taxes, Depreciation, And Amortization, Interest, Discount Window

Course Code
FIN 300
Michael Inglis
Study Guide

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FIN 300 Blawal Aleem
Chapter 1
Corporate Finance and the Financial Manager
3 Questions for Financial Manager What long-term investments should you take on? Where
will you get the long-term financing to pay for your investment? How will you manage you
every day financial activities?
Capital Budgeting The process of planning and managing a firm’s investment in long-term
Capital Structure The mix of debt and equity maintained by a firm
Working capital management Planning and managing the firm’s current assets and liabilities
Forms of Business Organization
Sole Proprietorship A business owned by a single individual
Partnership A business formed by two or more co-owners
Corporation A business created as a distinct legal entity owned by one or more individuals or
The Goal of Finance Management

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FIN 300 Blawal Aleem
Possible Goals
Survive in Business
Avoid financial distress and bankruptcy
Beat the competition
Maximize sales or market share
Minimize costs
Maximize profits
Maintain steady earnings growth
- The Goal of financial management is to maximize the current value per share of existing
The Agency Problem and control of the Corporation
Agency Problem The possibility of conflicts of interest between the shareholders and
management of a firm
Corporate Governance Rules for corporate organization and conduct
Stakeholder Anyone who potentially has a claim on a firm
Financial Markets and the Corporation
Money Markets Financial markets where short-term debt securities are bought and sold

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FIN 300 Blawal Aleem
Capital Markets Financial markets where long-term debt and equity securities are bought and
Primary Markets Refers to original sale of securities by governments and corporations (In
Primary market transaction, corporation is seller and transaction raises money for corporation
ex. public offerings and private placements)
Secondary Markets Where securities are bought and sold after original sale (Secondary
market transaction involves one owner or creditor selling to another, secondary market
provides means for transferring ownership of corporate securities ex. auction markets and
dealer markets)
Financial Institutions
Financial Institutions Act as intermediaries between investors (fund suppliers) and firms
raising funds
Trends in Financial Markets and Financial Management
Financial Engineering Creation of new securities or financial processes
Derivative Securities Options, futures, and other securities whose value derives from the
price of another, underlying, asset
Regulatory Dialectic The pressures financial intuitions and regulatory bodies exert on each
Chapter 2
Balance Sheet
Balance Sheet Financial statement showing a firm’s accounting value on a particular date
Generally Accepted Accounting Principles (GAAP) The common set of standards and
procedures by which audited financial statements are prepared
Mark-to-market Accounting rules using market values rather than book values of assets and
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