2022 NEW REVIEW DOCUMENT FOR FNAN 300 CH. 1
STOCK PRICE
to maximize the shareholders' wealth, maximize the stock price or maximize the VALUE OF
THE FIRM -the primary goal of the firm is to maximize the _______________
1. Lower Prices with Acceptable Quality
low cost, sell high
- McDonalds, Kia, Generic brand items
2. Convenience or Location
- McDonalds, Walgreens, CVS, Amazon Prime
3. Delivery Speed or Method
online, 2-day shipping
- Amazon Prime, Walmart grocery pick-up
4. Superior Products
- Ruth's Chris, Mercedes, Patek Watch
5. Unique Products with Economies of Scale
- Tesla, Netflix, Apple, Facebook -what are 5 ways that successful companies identify, create
and deliver products or services that are highly valued to build a competitive advantage?
all successful companies sell their products/services at prices that are high enough to cover all
operating costs & to compensate owners and creditors for their exposure to risk
* its not enough to just win market share and show profit, the profit must be high enough to
adequately compensate investors & creditors * -produce at a low cost or provide a better
product/service, have the most attractive location/delivery means or offer a unique product or
service
1. Operating costs : CGS, Operating Expense
2. Debt : Interest & Principal
3. Equity Financing : Return to shareholders in Dividends & Capital appreciation -"covering all
costs" includes.... (operating and financing)
finance -the science and art of managing money
, managerial finance -concerns the duties of the financial manager in a business
stockholders -The owners of a corporation, whose ownership, or equity, takes the form of
common stock or, less frequently, preferred stock
limited liability -a legal provision that limits stockholders liability for a corporations debt to the
amount they initially invested in the firm by purchasing stock
common stock -the purest and most basic form of corporate ownership
dividends -periodic distributions of cash to the stockholders of a firm
1. executives
long-term visions, smart, experienced, aware of operating environment and challenges
2. middle management
loyal, intelligent, understand the goals and mission, hard working
3. labor
force-talented, dedicated, knows management supports them -successful companies have what
3 groups of skilled people?
1. successful companies have skilled people
2. have strong relationships with groups outside of the company
3. have sufficient capital to execute plans and support operations
Internal Funds > Retained Earnings = non distributed profits (balance sheet & contribution from
Income statement)
External Funds > band loans, issue bonds, stock bonds -3 attributes to success?
retained earnings -non distributed profits
assets -investments
STOCK PRICE
to maximize the shareholders' wealth, maximize the stock price or maximize the VALUE OF
THE FIRM -the primary goal of the firm is to maximize the _______________
1. Lower Prices with Acceptable Quality
low cost, sell high
- McDonalds, Kia, Generic brand items
2. Convenience or Location
- McDonalds, Walgreens, CVS, Amazon Prime
3. Delivery Speed or Method
online, 2-day shipping
- Amazon Prime, Walmart grocery pick-up
4. Superior Products
- Ruth's Chris, Mercedes, Patek Watch
5. Unique Products with Economies of Scale
- Tesla, Netflix, Apple, Facebook -what are 5 ways that successful companies identify, create
and deliver products or services that are highly valued to build a competitive advantage?
all successful companies sell their products/services at prices that are high enough to cover all
operating costs & to compensate owners and creditors for their exposure to risk
* its not enough to just win market share and show profit, the profit must be high enough to
adequately compensate investors & creditors * -produce at a low cost or provide a better
product/service, have the most attractive location/delivery means or offer a unique product or
service
1. Operating costs : CGS, Operating Expense
2. Debt : Interest & Principal
3. Equity Financing : Return to shareholders in Dividends & Capital appreciation -"covering all
costs" includes.... (operating and financing)
finance -the science and art of managing money
, managerial finance -concerns the duties of the financial manager in a business
stockholders -The owners of a corporation, whose ownership, or equity, takes the form of
common stock or, less frequently, preferred stock
limited liability -a legal provision that limits stockholders liability for a corporations debt to the
amount they initially invested in the firm by purchasing stock
common stock -the purest and most basic form of corporate ownership
dividends -periodic distributions of cash to the stockholders of a firm
1. executives
long-term visions, smart, experienced, aware of operating environment and challenges
2. middle management
loyal, intelligent, understand the goals and mission, hard working
3. labor
force-talented, dedicated, knows management supports them -successful companies have what
3 groups of skilled people?
1. successful companies have skilled people
2. have strong relationships with groups outside of the company
3. have sufficient capital to execute plans and support operations
Internal Funds > Retained Earnings = non distributed profits (balance sheet & contribution from
Income statement)
External Funds > band loans, issue bonds, stock bonds -3 attributes to success?
retained earnings -non distributed profits
assets -investments
