What should be the ultimate goal of a corporation?

Profit maximization vs Value Maximization

 Profit
 Brand
 Sustainability
 Employee satisfaction
 Customer satisfaction
 Innovative
 R&D
 Grow/Expand

Profit should not be ultimate goal, because it ignores the following 3 factors:

1. Risk
a. Profit>>> risk >>>>bankruptcy
2. Time
a. Bmw (high profit margin) vs premio (moderate profit margin)
b. 3 years payment
c. Invest>>>>> after 3 years
3. Cash
a. Profit is an accounting variable: Sales – Cost = profit
b. Credit sales
c. Discounts
i. Cash
4. Quality

Types of Business Organizations:

 Sole proprietorship
 Partnership
 Limited liability company/ corporation

Sales – cogs = GP = O.E = OP / EBIT – interest = taxable income – tax = Net profit 100 –
retained earnings > dividend > shareholders

Dividend is income or shareholders

Income tax

Agency problem: principal vs agent

Financial Statements:
Why do we create statements? – report financial data in an organized manner
Users of data can access and assess data easily
 Users of financial info:
o Internal: management, shareholders, internal auditors
o External: government, suppliers, vendors, potential investors, banks, lenders,
customers, competitors, auditors, agencies, regulatory bodies, aid

Performance: sales/revenue, profit margins (gross, operating, net), expenses

Position: assets positions, cash position, liability position, equity position

There 3 main financial statements:

 Income Statement/ P&L: performance
o Temporary
o Periodic: annual, quarterly, half-yearly, monthly etc.
o Spring 22: 254 80>>> 10= 80+10 =90 A-
o 2021: sales 100,000
o 2022: sales 000
o For the period ended in dec 31, 2021
 Balance Sheet: position
o Permanent
o 2021 dec 31 Cash 1000
o 2022 jan: cash 1000-500 = 000
o As of jan 31, 22
o 100; 2 year as of today your cash balance is 30; today’s balance; tomorrow
you earned 5 taka more; as of tomorrow 35
 Statement of Cash flow: cash performance and position

Taxation:

Government policy: fiscal (revenue) & monetary (to manage money supply/value)

Government revenue:
 Tax
 Investment return
 Financial instruments: bonds,

Income Tax:
 Marginal tax/progressive tax
 Tax rate changes according to your income. Higher your income higher will be your
tax.
 0 to 100K 12%
100K to 15%
250K
250k to 22%
350K
350K to 25%
500K
>500K 30%

If my income is 450,000
450,000 *25% = 112,500

100,000 *12% = 12,000

150,000 *15% = 22,500; remaining 200,000
100,000 * 22% = 22,000; remaining 100,000
100,000 * 25% = 25,000

Total tax = 12K + 22.5K + 22K + 25K = 81,500

Using marginal tax rate, how much have you paid in tax on an average?

81,500/450,000 = 18%

 Average or flat tax

o Regardless of your income, if you are eligible to pay tax, you will pay tax at a
fixed rate.
o Avg tax 15%: I, you, bashundhara, salman
Financial Markets:
Asset that is traded in Fin. Market: Money – cash, loan, stock, bonds, MFs, crypto other
instruments

 Takers of money: Demand: deficit of money

o Individuals
o Institutions
o Government
 Givers of money: Supply: surplus of money; lenders, investors
o Individuals
o Institutions
o Government

Financial Intermediaries
 Institutional intermediaries
o Commercial Banks: BRAC BANK: savings mr. x (10%) >>>loan mr y (12%)
o Investment Bank:
 M&A
 IPO
 Underwrite
 NSU wants to raise equity money from the capital market.
 Capital is used for investments<<<<< financing
 1 share FV = 1000 USD
 Lanka-bangla: 980 USD>>> 1000
o Funds: pool of money – investment
 Mutual funds
 Pension funds
 Hedge funds
o Private placement
o Venture capitalist
o Private equity: Teslq, apple, amazon, GP, Bkash
 Market intermediaries
Invest>> money>>> short-term (0-12 months) and long-term (more than a year)
Long-term investment is known as capital
o Money market: short term money
 Commercial papers,
o Capital market: long term money
 Bonds, shares etc.
 Bond market
 Stock market
o Primary market
 IPO
 500 crore new campus
 50 crore
 Bank loan 150
  Deficit: 300 cr
 Public equity
 Citi NA
 10,000,000 share
 300 cr: 1 cr shares
 450 per share
o Secondary
 Trade
 600
Financial instruments is basically a piece of paper with terms and conditions.
Bond is a debt instrument.

By issuing bond you can actually borrow money. The bond buyer is basically lending
you money. Let’s say 1 bond is sold at 1100 USD. In this case, how much money
borrowed? 1100
Bond buyer: loan giver
Bond seller: loan seeker
1 pound cake 1000
2 unit 1000/2 = 500 taka per unit

540 *2 = 1080
 1 crore capital to open a new factory:
o Borrow: Debt financing
o Share issue: equity financing