Highlights Chapter 1
Foundations of Financial Management.

The Goals and Functions of the Financial Manager

    Exciting Dynamic Arena

    Issues of career threatening, Business threatening and Ethical importance.

    Careful management of Capital

    Economics and Accounting

    Commercial banking structure

 

Financial Management Issues

    Risk Return

    Capital Structure (Debt and Capital)

    Inflation

 

 

Financial Management Functions

    Best mix, current and fixed assets

    Dividends

    Maximize shareholder wealth

   Risk return

 

Forms of Business

      Sole proprietor

     Simple decision making low setup costs

     Limited financing ability

     Liability

     taxation

      Partnership

     More financing ability

     Liability can be big..

     Limited financing for limited partnerships

      Corporation

     Easy divisibility of ownership

     Conflict of interests, owners and managers, and different ownership groups

     Huge financing opportunities

     Limited liability.

     May be double taxation.

 

Goals of Financial Management

    Agency Theory

   Relationship management and ownership

   Stock options

   Takeovers

   Inside trading

    Maximize profit?

   What about risk

   Timings

   Different ways to measure profit.

    Valuation (share price)

    Maximize shareholder wealth

Financial Markets

    Money Markets

  Short term (less than one year)

    Capital Markets

   Longer term securities (more than one year)

    Provide funds for investments

    Primary and secondary markets

    Restructuring