Download Fundamentals of Corporate Finance

Fundamentals of
Corporate Finance
Fundamentals
of
Chapter 1
Corporate Finance
Fourth Edition
The Firm
&
The Financial
Manager
Irwin/McGraw Hill
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved
Topics Covered

Organizing a Business
The Role of The Financial Manager
Who
Is The Financial Manager?
Goals of the Corporation
CEO Pay
Organizing A Business
Sole Proprietorships
Partnerships
Corporations
Characteristics of Business
Organizations
Characteristics
Ownership
Manager-Owner
Seperation
Sole
Prop.
Partner.
Corp.
Manager
Partners
Shareholders
Same
Same
Usually
Seperated
Owner’s Liability
Unlimited Unlimited
Taxing
Personal
Income
Personal
Income
Limited
Personal
Income
&Corporate
Tax
Corporate Structure
Sole Proprietorships
Unlimited Liability
Personal tax on profits
Partnerships
Limited Liability
Corporations
Corporate tax on profits +
Personal tax on dividends
Assets
Real Assets:Used to produce goods & services
Tangible: Machinery, factory, offices
Intangible:Trade mark,patents,technical expertise
Financial Assets: Claims to the income generated by real
assets. Also called securities.
The Role of Financial Manager
Firm’s
Operations
Real Assets
Financial
Manager
Money Flows
Investors
Basic Problems
Capital Budgeting Decision
What real should the Firm acquire?
Financing Decision
How should cash be raised to finance real investments?
Goals of The Financial Management


Shareholders desire wealth maximization
Do managers maximize shareholder wealth?
Max VALUE = f ( I, F )
Max VALUE = f ( I, F, D )
The Role of Financial Markets
Firm’s
Operations
Financial Markets
Stock Markets
Bond Markets
Foreign Exchange etc.
Financial
Manager
Real Assets
Money Flows
Investors
Financial Intermediaries
Mutual Funds
Pension Funds
Financial Institutions
Banks
Insurance Companies