Finance at Tilburg University | Flashcards & Summaries

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Lernmaterialien für Finance an der Tilburg University

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main purpose for trading in the stock market

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liquidity

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agency problem

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managers have little incentive to work in the interests of the shareholders
when this means working against their own self-interest.

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The rate at which we can exchange money today for money in the future is determined by

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interest rate

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Prices can deviate more than the transactions costs of the arbitrage.  

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FALSE

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who elects the board of directors

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shareholders

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Sole Propreitorships

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business owned and run by one person.

most common type of firm

often verysmall 

with few, if any, employees.

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what is the CEO incharged of?

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running the corporation

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advatnages and disadvantages of corporations

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Advantages: Greater financial and strategic flexibility to achieve growth, more stable equity
base, disperse risk. Motivate employees by letting them own shares. only ones able to trade on the stock market
structure • Disadvantages: Constant pressure of shareholders vs CEO, separation owner-firm 

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explain the double taxation and to whom it affects

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Because a corporation is a separate legal entity, a corporation's profits are subject to taxation seperate from its owners' tax obligations. Shareholders pay taxes twice. First, the corporation pays tax on its profits and then when the remaining profits are distributed to the shareholders, the shareholders pay their own personal income tax on this income.

"S" corporations are excempt but 

"C" corporations (most large corporations) have to pay it.


1- corporate tax

2- personal tax

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corporation

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a legally defined, artificial being (a judical person or legal entity) separate from
its owners.

it is solely responsible for its own obligations, not its owners.


Corporations mst be legally formed

More costly than setting up a simpler types

There is no limit on the number of owners of a corporation can have. With many owners, each owner owns only a small fraction of the corporation.


The entire ownership stake of a corporation is divided inot shares known as stock. The collection of all outstanding shares of a corporation is known as the equity of the corporation.

There is no limitation on who can own its stock.

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advantages sole proprietorship

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They are straightforward to set up. Attractive for new businesses

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Partnership

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TESTE DEIN WISSEN

identical to a sole proprietorship except it has more than one owner

All partners are liable for the firm's debt. Any partner can be asked to repay all the firm's
outstanding debts. 
2. The partnership ends on the death or withdrawal of any single partner (although agreements can be made) 

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Q:

main purpose for trading in the stock market

A:

liquidity

Q:

agency problem

A:

managers have little incentive to work in the interests of the shareholders
when this means working against their own self-interest.

Q:

The rate at which we can exchange money today for money in the future is determined by

A:

interest rate

Q:

Prices can deviate more than the transactions costs of the arbitrage.  

A:

FALSE

Q:

who elects the board of directors

A:

shareholders

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Q:

Sole Propreitorships

A:

business owned and run by one person.

most common type of firm

often verysmall 

with few, if any, employees.

Q:

what is the CEO incharged of?

A:

running the corporation

Q:

advatnages and disadvantages of corporations

A:

Advantages: Greater financial and strategic flexibility to achieve growth, more stable equity
base, disperse risk. Motivate employees by letting them own shares. only ones able to trade on the stock market
structure • Disadvantages: Constant pressure of shareholders vs CEO, separation owner-firm 

Q:

explain the double taxation and to whom it affects

A:

Because a corporation is a separate legal entity, a corporation's profits are subject to taxation seperate from its owners' tax obligations. Shareholders pay taxes twice. First, the corporation pays tax on its profits and then when the remaining profits are distributed to the shareholders, the shareholders pay their own personal income tax on this income.

"S" corporations are excempt but 

"C" corporations (most large corporations) have to pay it.


1- corporate tax

2- personal tax

Q:

corporation

A:

a legally defined, artificial being (a judical person or legal entity) separate from
its owners.

it is solely responsible for its own obligations, not its owners.


Corporations mst be legally formed

More costly than setting up a simpler types

There is no limit on the number of owners of a corporation can have. With many owners, each owner owns only a small fraction of the corporation.


The entire ownership stake of a corporation is divided inot shares known as stock. The collection of all outstanding shares of a corporation is known as the equity of the corporation.

There is no limitation on who can own its stock.

Q:

advantages sole proprietorship

A:

They are straightforward to set up. Attractive for new businesses

Q:

Partnership

A:

identical to a sole proprietorship except it has more than one owner

All partners are liable for the firm's debt. Any partner can be asked to repay all the firm's
outstanding debts. 
2. The partnership ends on the death or withdrawal of any single partner (although agreements can be made) 

Finance

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