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Lecture 1 - An Introduction of Corporate Finance
Lecture 1 - An Introduction of Corporate Finance
Lecture 1 - An Introduction of Corporate Finance
AN OVERVIEW OF
FINANCIAL MANAGEMENT
Chapter Outline
1
09-Aug-21
Fixed Assets
1 Tangible
Shareholders’
2 Intangible Equity
2
09-Aug-21
Current
Liabilities
Current Assets
Long-Term
Debt
Fixed Assets
What long-term
1 Tangible investments Shareholders’
should the firm
2 Intangible Equity
choose?
Current
Liabilities
Current Assets
Long-Term
How should the Debt
firm raise funds
for the selected
Fixed Assets
investments?
1 Tangible Shareholders’
2 Intangible Equity
3
09-Aug-21
Current
Liabilities
Current Assets
Net
Working Long-Term
Capital Debt
How should
Fixed Assets
short-term assets
1 Tangible be managed and
financed? Shareholders’
2 Intangible Equity
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09-Aug-21
Treasurer Controller
• The corporate form of business is the standard method for solving the
problems encountered in raising large amounts of cash.
• However, businesses can take other forms.
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• The Corporation
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A Comparison
Corporation Partnership
Voting Rights Usually each share gets one General Partner is in charge;
vote limited partners may have
some voting rights
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Taxes (D)
The cash flows from
Ultimately, the firm
the firm must exceed
must be a cash Government
the cash flows from
generating activity.
the financial markets.
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14
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09-Aug-21
• Agency relationship
• Principal hires an agent to represent his/her interest
• Stockholders (principals) hire managers (agents) to run the
company
• Agency problem
• Conflict of interest between principal and agent
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Managerial Goals
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09-Aug-21
Managing Managers
• Managerial compensation
• Incentives can be used to align management and stockholder
interests
• The incentives need to be structured carefully to make sure that
they achieve their intended goal
• Corporate control
• The threat of a takeover may result in better management
• Other stakeholders
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