Key Concepts in Corporate Finance: A Comprehensive Review
Key Concepts in Corporate Finance
1. Primary financial goal of financial management: maximize market value of owners equity.
2. Characteristics of a corporation include: Limited owner’s liability, No operating control.
3. C corp pays income taxes at the business level, and then owners pay taxes on the same earnings when distributed.
4. Dividends are determined by the corporation’s board of directors.
5. Investor’s capital is best characterized as the: sum of the market value of debt and the market value
Read MoreEconomic Activity, Systems, and Market Dynamics
Chapter 1: Economic Activity and Economic Systems
The Need to Choose
1. The Concept of Economics
Economics deals with how societies manage scarce resources to produce goods and services and distribute them for consumption among members of society. In individuals, it is concerned with how they use their income carefully and wisely to obtain the maximum benefit. In a society, it deals with how individuals reach the highest possible level of material well-being from the resources they have available.
Read MoreGlobal Economic Impact of World War I and the Roaring Twenties
Global Economic Impact of World War I
Europe was severely affected by World War I, suffering significant demographic losses with 8 to 10.5 million deaths, over 6 million disabled, and more than 21 million injuries. The post-war economy was chaotic, with over 10% of its production base destroyed, including machinery and infrastructure. Europe lost its economic dominance and colonial markets, experiencing high inflation. The U.S. was owed large sums of money, while European countries were indebted
Read MoreBusiness Operations: Production, Costs, and Inventory Management
The Production Process
The production process involves applying a technological process to transform production factors into finished products. Factors constitute production inputs, and outputs are finished products.
Average Maturation Period
This consists of a process in which production factors are acquired and can be inventoried. They are stored to join the transformation process. The finished products are stored before sale and shipment. The average maturation period elapses from when a monetary
Read MorePersonal Finance: Interest, Insurance, Investments, and Retirement
Simple Interest
Interest on a loan or investment is computed as a percentage of the loan or investment amount, or principal.
Ex. Farah invests $1,000 in a GIC that pays 3 percent simple interest each year. At the end of year one, the bank will credit Farah’s chequing account with $30. I=P x r x t —- $30=$1000´0.03´1
Compound Interest
Farah decides to invest her money into a GIC that pays 3 percent interest compounded annually.
Interest earned will be re-invested back into the GIC and not to her
Read MoreStrategic Patent Management and Intellectual Property Rights
Strategic Patent Management and Intellectual Property Rights
Extracting Value from Intellectual Property Rights
In addition to being used directly by a firm, a patent can be:
- Sold: The assignee sells all of their rights to a third party.
- Licensed out: The assignee holds the ownership and sells the right to use the invention under certain conditions for a limited time.
Understanding License Agreements
A license agreement can be very complex and generally includes:
- Extent of the rights of use: Duration,