Principles of Corporate Finance

Chapter 1

Eighth Edition

Finance and The Financial Manager

Slides by Matthew Will

McGraw-Hill/Irwin

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

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Topics Covered
What Is A Corporation? The Role of The Financial Manager Who Is The Financial Manager? Separation of Ownership and Management

McGraw-Hill/Irwin

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

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Corporate Structure
Sole Proprietorships

Unlimited Liability
Personal tax on profits

Partnerships Limited Liability Corporations Corporate tax on profits + Personal tax on dividends (dividend distribution tax as of now in India)
McGraw-Hill/Irwin Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

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Role of The Financial Manager

(2) (1)

Firm's operations
(3)

Financial manager

(4a)

Financial markets

(4b)
(1) Cash raised from investors (2) Cash invested in firm (3) Cash generated by operations (4a) Cash reinvested (4b) Cash returned to investors

McGraw-Hill/Irwin

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

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Role of The Financial Manager

Common Finance Terminology
Real assets Financial assets / Securities Capital markets and financial markets Investment / capital budgeting Financing

McGraw-Hill/Irwin

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

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Who is The Financial Manager?

Chief Financial Officer

Treasurer

Controller

McGraw-Hill/Irwin

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

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Ownership vs. Management

Difference in Information Different Objectives

Stock prices and returns Issues of shares and other securities Dividends Financing

Managers vs. stockholders Top mgmt vs. operating mgmt Stockholders vs. banks and lenders

McGraw-Hill/Irwin

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved

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Web Resources
Click to access web sites Internet connection required

www.careers-in-finance.com/ www.careers.wsj.com www.wageweb.com www.corpgov.net www.thecorporatelibrary.com

McGraw-Hill/Irwin

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved