chief financial officer (CFO)

the top financial manager within a firm; the overseer

treasurer

oversees cash management, credit management, capital expenditures, and financial planning

controller

oversees taxes, cost accounting, financial accounting, and data processing

sole proprietorship

business owned by one person

• easiest to start
• least regulated
• owner keeps profits
• taxed once
• unlimited liability
• transfer of ownership is very hard

partnership

business owned by two or more persons

• easy to start
• taxed once as personal income
• unlimited liability for GPs
• limited partners don't manage
• difficult to transfer ownership

corporation

a legal entity distinct from owners and a resident of a state

• harder to start
• easier to raise capital
• unlimited life
• transfer of ownership is easy
• double taxation
• separation of ownership and management

book value

the balance sheet value of the assets, liabilites, and equity

market value

the price at which the assets, liabilities, or equity can actually be bought or sold now

GAAP matching principle

recognize revenue when it is fully earned, not necessarily when the cash is received and match expenses required to generate revenue to the period of recognition

noncash items

expenses changed against revenue that do not affect cash flow

marginal (statutory) rate

% tax paid on the next dollar earned

average (effective) rate

total tax bill/taxable income

default risk premium

bond ratings

taxability premium

municipal vs. taxable

liquidity premium

bonds that have more frequent trading generally have lower required returns

maturity premium

longer term bonds will tend to have higher required returns

term structure

the relationship between time to maturity and yields, all else equal