Finance

CHAP 1 - Income Trust – hold the debt and equity of an underlying firm and distribute the income generated to unitholders. Not subject to corporate income tax, tax efficient. By 2011 most will be required to convert to corporations. The goal of financial management is to maximize the current value per share of existing stock. Stakeholder – anyone who potentially has a claim on a firm. Corporate governance – rule for corporate organization and conduct Chartered Banks – accept deposits from suppliers of funds and make commercial loans, corporate loans and personal loans. Trust companies accept deposits and make loans. Investment dealers are non-depository institutions that assist firms in issuing new securities for a fee. Insurance companies engage in indirect finance by accepting funds in a form similar to deposits and making loans. Pension funds invest contributions from employers and employees in securities. Mutual funds pool individual investments to purchase portfolios of securities. Hedge funds are largely unregulated and privately managed, aim to earn high returns using aggressive strategies prohibited by mutual funds which include arbitrage, high leverage and derivatives

CHAP 2 - Cash flow from assets – the total of cash flow to bondholders and cash flow to shareholders including operating cash flow, capital spending and change in NWC. Operating cash flow – revenues minus costs, include taxes but not depreciation and interest (EBIT+Dep-Taxes) Capital spending - money spent on fixed assets less money received on sale of fixed assets (Ending fixed assets-beg fixed assets+dep) Change in NWC (Ending NWC-Beg NWC) Cash flow from assets = Operating cash flow minus net capital spending minus changes in NWC Cash flow to creditors = Interest paid minus net new borrowings>>cash flow to shareholders = dividends paid minus net new equity (common shares) Cash flow from assets = cash flow to creditors and shareholders -cash flow identity Ideal tax...