BU121 Midterm: BU-121 SOS Slides Finance Theory
Document Summary
Real human, financial capital must be rented from owners. Risk and expected reward go hand in hand. While accounting is the language of business, cash is the currency. New venture financing involves search, negotiation, and privacy. A (cid:448)e(cid:374)ture"s fi(cid:374)a(cid:374)(cid:272)ial o(cid:271)je(cid:272)ti(cid:448)e is to i(cid:374)(cid:272)rease (cid:448)alue. Venture character and reputation can be assets or liabilities. It is dangerous to assume that people act against their own self-interest. A company that is profitable can go bankrupt. If (cid:272)o(cid:373)pa(cid:374)ies do(cid:374)"t (cid:272)olle(cid:272)t (cid:272)ash fro(cid:373) sales, the i(cid:374)(cid:272)o(cid:373)e state(cid:373)e(cid:374)t (cid:449)ill sho(cid:449) profit, (cid:271)ut there will be no cash to pay off debts. Accounts payable: also, if you have cash on hand but owe debts to the bank or other lenders you can go bankrupt. Amortization: value of assets can change quickly. Fixed costs: costs that are fairly pre-determined, expected to remain fixed over a range of revenues for a set period of time.
