Download Financial Management for Entrepreneurs

What is finance?
 What do financial managers do?
 Relationships between finance &
economics/accounting
 What is the goal of financial decisions?

Ch 1 Learning Goals
0

Finance studies the process of how
organizations and individuals _________
____________________________and
________________________________.
What is finance?
1

Finance as a discipline can be broken
down into:
◦
◦
◦
◦
◦
Managerial (Corporate) Finance
Investments
Financial Institutions
Personal Finance
Government (Public) Finance
Finance
2

Finance 311 is primarily about managerial
finance, and to a lesser extent, personal
finance.
Finance 311
3

The financial manager manages the
financial affairs of any organization.

Duties of financial managers:
◦
◦
◦
◦
Financial _____________________
Financial _____________________
_____________________________ decisions
_____________________________ decisions
Managerial Finance
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
Financial analysis: evaluating financial
________________________________
Duties of Financial Managers
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
Financial planning: forecasting _______
_____________.
Duties of Financial Managers
6

Financing decisions: where __________
will come from
Duties of Financial Managers
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
Investment decisions:
◦ how funds will be allocated
◦ what ________________ will be
acquired
Duties of Financial Managers
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Relationship to Economics
The primary economic principal used in
making financial decisions is marginal
analysis: implement decisions if marginal
__________________ exceed marginal
___________________.
Managerial Finance Function
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Relationship to Accounting
The firm’s finance (treasurer) and
accounting (controller) functions are
closely related and overlapping.
Managerial Finance Function
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Relationship to Accounting
In smaller firms, the financial manager
generally functions as both treasurer &
controller.
In bigger firms, the accounting function is
under the Chief Financial Officer (CFO).
Managerial Finance Function
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Relationship to Accounting
Much of the information relied on by
financial managers is from accounting
statements. However, accounting is based
on the accrual method, while in finance
the focus is on _____________________.
Managerial Finance Function
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Goal of financial decisions: maximize
shareholder wealth by maximizing the
_______________________of the stock.
Goal of the Firm
13

The market price of a firm’s stock reflects:
◦ Expected _______________________
◦ ____________________ of the cash flows
◦ ____________________ of the cash flows
Goal of the Firm
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Do managers always act in shareholders’
best interests? Of course not.
(Why not?)
The Agency Issue
15
The conflict of interest between managers
and shareholders is an example of an
agency conflict.
 What keeps managers in line?

The Agency Issue
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