16 Questions
Types of firms
Sole Proprietorships, Partnerships, Corporations
Objective of corporation
maximize profit, or maximize shareholders wealth
Agency problems and related agency costs
Corporate governance and sustainable business
The time value of money
The concept that money available today is worth more than the same amount in the future due to its potential earning capacity
FEATURES OF CORPORATIONS
Limited Liability, Corporate tax on profits + Personal tax on dividends
ROLE OF FINANCIAL MANAGER
Right investment decisions, Proper financial decisions
Present Value
Value today of a future cash flow
Discount Rate
Interest rate used to compute present values of future cash flows
Future Value
Amount to which an investment will grow after earning interest
Discount Factor
Present value of a £1 future payment
Discount Factor Equation
$\frac{1}{(1+r)}$
Perpetuity Equation
$PV_0 = \frac{C_1}{r}$
Growing Perpetuity Equation
$PV_0 = \frac{C_1}{r-g}$
Annuity
A stream of constant cash flows that lasts for a fixed number of T years
Annuity Equation
$PV \text{ of annuity} = C \times \frac{1-(1+r)^{-t}}{r}$
Bond Valuation Equation
$P_0 = \frac{F}{(1+r)^T}$
Test your knowledge of corporate financial management with a focus on the introduction, types of business organizations, features of corporations, and the time value of money. This quiz covers topics from BMA chapters 1 and 2.
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