Summary Principles of Managerial Finance

236 Flashcards & Notes
6 Students
  • This summary

  • +380.000 other summaries

  • A unique study tool

  • A rehearsal system for this summary

  • Studycoaching with videos

Remember faster, study better. Scientifically proven.

This is the summary of the book "Principles of Managerial Finance". The author(s) of the book is/are Gitman. This summary is written by students who study efficient with the Study Tool of Study Smart With Chris.

PREMIUM summaries are quality controlled, selected summaries prepared for you to help you achieve your study goals faster!

Summary - Principles of Managerial Finance

  • 1.1 Finance and Business

  • Def. finance
    the science and art of managing money
  • def. managerial finance
    Concerns the duties of the financial manager in a business
  • Financial services
    The area of finance concerned with the design and delivery of advice and financial products to individuals, businesses, and governments.
  • Financial manager
    Actively manages the financial affairs of all types of businesses, whether private or public, large or small, profit seeking or not for profit.
  • 3 most common legal forms

    1. sole proprietorship

    2. partnership

    3. corporation

  • Sole proprietorship
    a business owned by one person and operated for his or her own profit. They have unlimited liability.
  • What is unlimited liability
    Giving creditors the right to make claims against the owner's personal assets to recover debts owed by the business.
  • Partnership
    A business owned by two or more people and operated for profit. They have unlimited liability
  • Corporation
     an entity created by law. they have limited liability
  • Who are the owners of a corporation?
    The stockholders
  • What is common stock?
    The purest and most basic form of corporate ownership.
  • What are dividends?
    Periodic distributions of cash to the stockholders of a firm.
  • 1.2 Goal of the Firm

  • What are earning per share?
    The amount earned during the period on behalf of each outstanding share of common stock.
  • How do you calculate EPS?
    period's total earnings available for the firm's CS / shares of common stock outstanding.
  • Def. risk
    The chance that actual outcomes may differ from those expected
  • Def. risk averse
    Requiring compensation to bear risk
  • What are stakeholders?
    Groups such as employees, customers, suppliers, creditors, owners, and others who have a direct economic link to the firm.
  • What are business ethics?
    Standards of conduct or moral judgment that apply to persons engaged in commerce.
  • 1.3 Managerial Finance Function

  • The treasurer and the controller are reporting to the CFO. What is a treasurer?
    The firms Chief financial manager, who manages the firm's cash, oversees its pension plans, and manages key risks.
  • What does the controller?
    the firms chief accountant, who is responsible for the firms accounting activities, such as corporate accounting, tax management, financial accounting, and cost accounting.
  • The foreign exchange managers typically report to the firm's treasurer, what are they doing exactly?
    The manager responsible for managing and monitoring the firm's exposure to loss from currency fluctuations.
  • Two basic differences between finance and accounting;
    one is related to the emphasis on cash flows and the other to decision making.
  • Accountant uses accrual basis, what is accrual basis
    In preparation of financial statements, recognizes revenue at the time of sale and recognizes expenses when they are incurred.
  • Financial manager uses the cash basis, what is that?
    Recognizes revenues and expenses only with respect to actual inflows and outflows of cash.
Read the full summary
This summary. +380.000 other summaries. A unique study tool. A rehearsal system for this summary. Studycoaching with videos.

Latest added flashcards

What is a flat yield curve?
A yield curve that indicates that interest rates do not vary much at different maturities.
What is a normal yield curve?
an upward-sloping yield curve indicates that long-term interest rates are generally higher than short-term interest rates.
What is an inverted yield curve?
A downward-sloping yield curve indicates that short-term interest rates are generally higher than long-term interest rates.
What is a reverse stock split?
a method used to raise the market price of a firm's stock by exchanging a certain number of outstanding shares for one new share.
What is a stock split?
A method commonly used to lower the market price of a firm's stock by increasing the number of shares belonging to each shareholder
Small ordinary stock dividend?
a stock dividend representing less than 20 % to 25% of the common stock outstanding when the dividend is declared
What is stock dividend?
the payment of a dividend in the form of stock.
What is extra dividend?
an additional dividend optionally paid by the firm when earnings are higher than normal in a given period.
What is the regular dividend policy?
a dividend policy based on the payment of a fixed-dollar dividend in each period.
What is the constant payout ratio dividend policy?
A dividend policy based on the payment of a certain percentage of earnings to owners in each dividend period.