Subject: Corporate Finance (3 credits)
1. Essentials of managerial Finance: Harcourt College 2000 2. Fundamentals of financial management: Mc Graw Hill 2007
Chapter 01: An overview of Finance
What is finance?
Finance is concerned with decisions about money (cash flows) Finance decisions deal with how money is raised and used
Everything else being equal:
* More vale is preferred to less
* The sooner cash is received the more value it has
* Less risky assets are more valuable than riskier assets *
General Areas of Finance:
* Financial Market and Institutions
* Financial Services
* Managerial Finance
Financial staff responsibility:
* Forecasting and planning
* Major investment and financing decisions
* Coordination and control.
* Dealing with the financial markets
* Risk management.
In summary, people working in financial management make decisions regarding which assets their firms should acquire, how those assets should be financed, and how the firm should conduct its operations. If these responsibilities are per- formed optimally, financial managers will help to maximize the values of their firms, and this will also contribute to the welfare of consumers and employees. Alternative Forms of business Organization:
1. Proprietorship (household/ individuals): is an unincorporated business owned by one individual Advantages (3):
* It is easily and inexpensively formed.
* Subject to few government regulations
* It is taxed like an individual, not a corporation (or no corporate income taxes) Limitations (4):
* Unlimited personal liability for business debts
* Limited life (life of business organized as a proprietorship is limited to the life of individual who created it.) * Transfering ownership is somewhat difficult
* Difficult to raise and obtain large sums of capital, because the firm’s financial strength is based on the financial strength of the sole owner. 2. Partnership (2 or more owners) Hop danh- nhom kinh doanh chung von. An unincorporated business owned by two or more persons. Same as proprietorship’s, except there are two or more owners 3. Corporation: A legal entity created by a state, separate and distinct from its owners and managers, having unlimited life, easy transferability of ownership, and limited liability. Ads:
* Unlimited life
* Easy transfer of ownership
* Limited liability
* Ease of raising capital (IPO-initial public offering)
* Cost of set-up and report filling,
* Double taxation (personal income tax and corporate income tax) Hybrid (combination) forms of business
1. Limited liability partnership (LLP): cty hop danh: = thanh vien hop danh (trach nhiem vo han) + thanh vien gop von (trach nhiem huu han). A hybrid form of organization consisting of general partners, who have unlimited liability for the partnership’s debts, and limited partners, whose liability is limited to the amount of their investment. 2. Limited liability company (LLC): A hybrid form of organization in which all partners enjoy limited liability for the business’s debts. It combines the limited liability advantage of a corporation with the tax advantages of a partnership 3. Shareholding corporation (S.Corporation): maximize value:
A type of corporation common among professionals that provides most of the benefits of incorporation but does not relieve the participants of malpractice liability. Business group: Tap doan
* Limited liability reduces risk then increasing market value * Ease of raising capital allows taking ads of growth opportunities * Ownership can be easily transferred , then investors would be willing to pay more for a corporation * Goals of corporation:
* Stockholder wealth maximization – translate to maximizing stock price * Managerial incentives
* Social responsibility: The concept that businesses should be actively...
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