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Introduction to Financial Management Organization of the Book The Underpinnings Part 1  Introduction to Financial Management Part 2  Financial statements  and analyze   Part 3, 4 & 6  Basic tools of financial analysis Main content Capital Budgeting   Part 5 Capital Structure Part 8 short term financing Part 7 long term financing Working capital management  Part 8  in chapter 17                                          Part 9 international aspects of financial management  Key Concepts and Skills The basic types of financial management decisions and the role of the financial manager.  The goal of financial management.  The financial implications of the different forms of business organization.  The conflicts of interest that can arise between managers and owners. Chapter Outline Business finance and the financial manager  Forms of business organization  The goal of financial management  The agency problem and control of the corporation  Financial markets and the corporation US Corporation Balance Sheet – Table 2.1 What is financial management? Capital budgeting Capital structure Working capital management Capital Budgeting  The process of planning and managing a firm’s long-term investments. What long-term investments should the firm take?  How much cash they expect to receive, when they expect to receive it, and how likely they are to receive it? (size, timing and risk of future cash flow)  Capital Structure  The mixture of debt and equity maintained by a firm. Where will you get the long-term financing to pay for your investment?  Does the firm issue equity or debt?  Should the firm issue short-term or long-term securities? Working Capital Management  A firm’s short-term assets and liabilities  Net working capital  How much cash and inventory should we keep on hand?  Should we sell on credit to our customers?  How will we obtain any needed short-term financing?  And where? Conclusion…, Financial management has three main areas of decisions: capital budgeting, capital structure, and working capital management. Organization of the Financial Management Function Board of Directors Chairman of the Board and Chief Executive Officer (CEO) Vice President Marketing Vice President Finance (CFO) Vice President Production President and Chief Operations Officer (COO) Organization of the Financial Management Function VP of Finance Treasurer Cash Manager Credit Manager Capital Expenditures Financial Planning Controller Tax Manager Cost Accounting Manager Financial Accounting Manage Data Processing Manager The Goal of Financial Management Profit Maximization Problems:  Put eyes on the present, ignore the firm’s development in the future.  Accounting net income or earning per share have little to do with what is good or bad for the firm. The Goal of Financial Management Maximize the current value per share of the existing stock Shareholders buy stock because they seek to gain financially, financial manager acts in the shareholders’ best interests by making Decisions that increase the value of the stock. The Goal of Financial Management Maximize the market value of the existing owners’ equity For-profit business, the total value of the stock in a corporation is simply equal to the value of the owners’ equity Agency Problem An agent is an individual authorized by another person, called the principal, to act on the latter’s behalf. Management acts as an agent for the owners (shareholders) of the firm. Agency Problem The relationship between stockholders and management is called an agency relationship. Such a relationship exists whenever someone ( the principal ) hires another ( the agent) to represent his or her interest. Agency Problem Agency problem: the possibility of conflict of interest between the owners and management of a firm. How to control and reduce Agency Problem?  Managerial compensation: stock option; job prospects.  Control of the Firm: proxy fight; takeover Business Organization We examine the four legal forms of business organization: Sole Proprietorships Partnerships (general and limited) Corporations Limited liability companies Sole Proprietorship A business owned by a single individual Sole Proprietorship     Advantages Simplest  Least regulated Single tax for personal income Disadvantages Unlimited liability  Limited life  Insufficient capital  Transfer of ownership difficulties Partnership A business formed by two or more individuals or entities Partnership  General partnership – all partners share in gains or losses, and all have unlimited liability for all partnership debts, not just some particular share.  Limited partnership – one or more general partners will run the business and have unlimited liability, but there will be one or more limited partners who do not actively participate in the business. Partnership    Advantages  Easy and inexpensive      to form Limited liability for limited partners  Single tax for personal income Disadvantages Unlimited liability for the general partner Limited life for business Transfer of ownership difficulties  Inability to raise additional cash for investment Corporation A legal “person” separate and distinct from its owners, and it has many of the rights, duties of actual person. Corporation         Advantages Limited liability Easy transfer of ownership Unlimited life Easier to raise large quantities of capital Disadvantages Double taxation More complicated to set up Limited Liability Company (LLC) This entity is to operate and be taxed like a partnership but retain limited liability for owners. Financial Market  A financial market is just a way of bringing buyers and sellers together. It is debt and equity securities that are bought and sold.  Primary markets  Secondary markets ( dealer, auction market) End of Chapter The first example computing cash flows has a link to the information in this table.  The arrow in the corner is used to return you to the example. Here is an example of a simplified balance sheet.  Many students make it through business school without ever seeing an actual balance sheet, particularly those who are not majoring in finance or accounting. I encourage you to bring in some annual reports and let the students see the differences between the simplified statements they see in textbooks and the real thing. This is a good place to talk about some of the specific types of items that show up on a balance sheet and remind the students what accounts receivable, accounts payable, notes payable, etc. are. Liquidity is a very important concept.  Students tend to remember the “convert to cash quickly” component of liquidity, but often forget the part about “without loss of value.” Remind them that we can convert anything to cash quickly if we are willing to lower the price enough, but that doesn’t mean it is liquid. Also, point out that a firm can be TOO liquid.  Excess cash holdings lead to overall lower returns.  See the IM for a more complete discussion of this issue.   附件(0 个)