Buisness Test

Goal of the Firm: Shareholder Wealth Maximization

Sole Proprietorship: business owned by a single individual

General Partnership: an association of 2+ people joining as co-owners to operate a business for profit. Each partner is fully responsible for liabilities incurred.

Limited Partnership: 1+ partners has limited liability, restricted to amount of capital he/she invests

Corporation: an entity that legally functions separate and distinct from its owners

Gross Profit: a firm's dollar sales minus cost of goods sold

Operating Income: Gross Profit minus Total Operating Expenses

Taxable Income: gross income from all sources, except for allowable exclusions, less any tax-deductible expenses

Dividend Exclusion: a corporation can normally exclude 70% of any dividends it receives from another corporation

Depreciation: the means by which an asset's value is expensed over its useful life for federal income tax purposes

Capital Gain: a gain resulting from sale/exchange of a capital asset

Capital Loss: a loss resulting from sale/exchange of a capital asset

Net Capital Loss carryback/carryforward: may be carried back 3 years and forward up to 5 years (applied against net capital gains)

Operating Loss carryback/carryforward: may be carried back 2 years and forward up to 20 years

Financial Market: Markets that allow people to easily buy and sell (trade) financial securities (stocks and bonds), commodities (metals and agricultural goods) and other items of value at low transaction costs.

Real Assets: Assets that are tangible or physical in nature such as land, machinery, and livestock.

Financial Assets: An asset that derives value because of a contractual claim. Stocks, bonds, bank deposits are all examples of financial assets.

Underwriting: The process of acting as an intermediary between an issuer of a security and the investing public.*The purchase and subsequent resale of a new security issue. The risk of selling the new issue at a satisfactory...