Lecture 1 Introdcution

Topics: Finance, Corporate finance, Stock market Pages: 12 (420 words) Published: March 15, 2015
MBA Program

The Role of Financial
Management
Lecture 1

Dr Svetlana Sapuric

1

MBA Program

The Role of
Financial Management





What is Financial Management?
The Goal of the Firm
Agency Relationships
External Factors and stock price

Dr Svetlana Sapuric

2

MBA Program

What is Financial
Management?
Concerns the acquisition, financing,
and management of assets with
some overall goal in mind.

Dr Svetlana Sapuric

3

MBA Program

Investment Decisions
Most important the three decisions:
• What is the optimal firm size?
• What specific assets should be acquired?
• What assets (if any) should be reduced or
eliminated?

Dr Svetlana Sapuric

4

MBA Program

Financing Decisions
Determine how the assets (LHS of balance
sheet) will be financed (RHS of balance
sheet).






What is the best type of financing?
What is the best financing mix?
What is the best dividend policy?
How will the funds be physically acquired?
Dr Svetlana Sapuric

5

MBA Program

Asset Management Decisions
• How do we manage existing assets
efficiently?
• Financial Manager has varying degrees
of operating responsibility over assets.
• Greater emphasis on current asset
management than fixed asset
management.
Dr Svetlana Sapuric

6

MBA Program

The Financial Manager’s
Responsibilities





Forecasting and planning
Major investment and financing decisions
Coordination and control
Dealing with financial markets

Dr Svetlana Sapuric

7

MBA Program

What is the Goal of the Firm?
Maximization of Shareholder
Wealth!
Value creation occurs when we maximize
the share price for current shareholders.
Dr Svetlana Sapuric

8

MBA Program

Managerial Actions to
Maximize Stockholder Wealth
• Capital Structure Decisions
• Capital Budgeting Decisions
• Dividend Policy Decisions

Dr Svetlana Sapuric

9

MBA Program

Agency Relationships
• An agency relationship exists whenever a
principal hires an agent to act on their
behalf.
• Within corporations, agency relationships
exist between:
– Stockholders and managers

Dr Svetlana Sapuric

10

MBA Program

Stockholders versus Managers
• Managers are naturally inclined to act
in their own best interests.
• But the following factors affect managerial
behavior:
– The threat of firing
– The threat of takeover
– Structuring managerial incentives
Dr Svetlana Sapuric

11

The External Environment
Summary of
Factors
Affecting
Stock Prices
Summary
ofMajor
Major
Factors
Affecting
Stock Prices
External
Level of Economic
Constraints:

1. Antitrust Laws
2. Environmental
Regulations
3. Product and
Workplace Safety
Regulations
4. Employment
Practices Rules
5. Federal Reserve
Policy
6. International
Developments

Strategic Policy
Decisions Controlled
by Management
1. Types of Products
and Services
Produced
2. Production Methods
Used
3. Relative Use of Debt
Financing
4. Dividend policy

Activity and
Corporate Taxes

Stock Market
Conditions

Expected
Profitability
Timing of Cash
Flows

Stock Price

Degrees of Risk

Dr Svetlana Sapuric

12

Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Lecture 1 NN 1 Essay
  • Essay about Lecture 1 Introduction
  • Lecture # 1 Essay
  • Lecture 1 Essay
  • Essay on Tbs907 Autumn2012 Lectures Chapter 1
  • Essay on Accounting Lecture-1
  • Financial Modelling
  • Essay about Lecture notes Genesis 1

Become a StudyMode Member

Sign Up - It's Free