FIN 350 Study Guide - Comprehensive Final Exam Guide - Earnings Before Interest And Taxes, Capital Budgeting, Zero-Coupon Bond
Document Summary
Principal hires an agent to represent his/her interest. Stockholders (principal) hire managers (agents) to run the company agency problem conflict of interest between principal and agent agency cost cost of conflict of interest management goals. Cash flows statement the 2 basic financial questions. What resources did we use to earn that? balance sheet identity assets = liabilities + stockholders" equity three concerns of the balance sheet. Refers to the ease and quickness with which asset can be converted to cash without a significant loss in value. The more liquid a firm"s assets, the less likely the firm is to experience problems meeting short-term obligations. Liquid assets often have lower rates of return than fixed assets debt versus equity. Creditors generally receive the first claim on the firm"s cash flow. Debt and equity have different costs (equity is more expensive) The relationship between them has an impact on the firm"s profitability value versus cost.
