Finance and Pearson Prentice Hall

Topics: Finance, Corporate finance, Investment Pages: 3 (661 words) Published: October 14, 2014
Chapter 1

What is Finance?
• Finance is the study of how people and
businesses evaluate investments and raise
capital to fund them.

Getting Started:
Principles of
Finance

skip pg 11

Modified by Dr. Hla Theingi

Three Questions Addressed by the
Study of Finance:

Business Organizational Forms

1. What long-term investments should the
firm undertake? (capital budgeting
decisions)
2. How should the firm fund these
investments? (capital structure decisions)
3. How can the firm best manage its cash
flows as they arise in its day-to-day
operations? (working capital management
decisions)
Modified by Dr. Hla Theingi
Copyright © 2011 Pearson Prentice Hall. All rights reserved.

1-2

Copyright © 2011 Pearson Prentice Hall. All rights reserved.

Copyright © 2011 Pearson Prentice Hall. All rights reserved.

1-3

Business
Forms

Sole
Proprietorships

Partnerships

Corporations

Hybrids

Modified by Dr. Hla Theingi
Copyright © 2011 Pearson Prentice Hall. All rights reserved.

1-4

The Goal of the Financial Manager






Copyright © 2011 Pearson Prentice Hall. All rights reserved.

1-5

The goal of the financial manager must be
consistent with the mission of the
corporation.
What is the generally accepted mission of
g
y
p
a corporation?
Corporate Mission: To maximize firm
value shareholder’s wealth (as
measured by share prices)
Modified by Dr. Hla Theingi

Copyright © 2011 Pearson Prentice Hall. All rights reserved.

1-6

1

Agency Considerations in Corporate
Finance

Ethics in Finance
• Finance has been home to an almost
continuous series of ethical lapses.

• In a corporation, the managers are the
agents and the stockholders are the
principal.
• All else equal, agency problems will reduce
the firm value.

Modified by Dr. Hla Theingi
Copyright © 2011 Pearson Prentice Hall. All rights reserved.

1-7

2.

3.

1-8

THE FOUR BASIC PRINCIPLES OF FINANCE
PRINCIPLE...
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