Professional Documents
Culture Documents
An Overview of Financial Management
An Overview of Financial Management
An Overview of Financial Management
An Overview of Financial
Management
Forms of Business Organization
Balancing Shareholder Value and Society Interests
Intrinsic Values, Stock Prices, and Managerial Incentives
Important Business Trends
Conflicts Between Managers, Stockholders, and
Bondholders
1-1
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Finance Within the Organization
Board of Directors
1-2
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Forms of Business Organization
• Proprietorship
• Partnership
• Corporation
1-3
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Proprietorships and Partnerships
• Advantages
– Ease of formation
– Subject to few regulations
– No corporate income taxes
• Disadvantages
– Difficult to raise capital
– Unlimited liability
– Limited life
• Often set up through LLCs/LLPs.
1-4
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Corporation
• Advantages
– Unlimited life
– Easy transfer of ownership
– Limited liability
– Ease of raising capital
• Disadvantages
– Double taxation
– Cost of setup and report filing
1-5
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Balancing Shareholder Value and Society Interests
1-7
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Determinants of Intrinsic Values and Stock Prices
Stock’s Stock’s
Intrinsic Value Market Price
Market Equilibrium:
Intrinsic Value = Stock Price
1-8
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Some Important Business Trends
1-9
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Conflicts Between Managers and Stockholders
1-10
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
Conflicts Between Stockholders and Bondholders