FINA 2202 Midterm: Exam 1 Review Guide

• School: Northeastern University
• Department: Finance & Insurance
• Course: FINA 2202
• Professor: david Myers

Document Summary

Difficult to sell ownership interest: partnership, general. Partners can either be limited or manage/control businesses general: corporation. Double taxation: corporate rate for income, personal rate for dividends, goal of financial management, maximize market value per share (most important!, maximize profits. Formulas in blue are on the formula sheet: minimize expenses/costs. The agency problem and control of the corporation: conflict of interest between principal (stockholders) and agent (managers, managerial compensation. Incentives to align management and stockholder interests: corporate control. Threat of a takeover may result in better/more efficient management. Financial markets and the corporation: primary (ipo) vs. secondary market (stock market, nyse, etc. ) Chapter 3: working with financial statements: understand sources and uses of cash and the statement of cash flows, sources. Inflow = when you sell something: decrease asset, increase liability or equity, uses, outflow = when you buy something. Standardize financial statements for comparison purposes: common-size balance sheet.