week four assignment

Topics: Corporation, Finance, Types of business entity Pages: 43 (9051 words) Published: January 13, 2014
Introduction to Financial Management
(Chapters 1, 2, 3, 4)

Part 4

Capital Structure and Dividend Policy
(Chapters 15, 16)

Part 2

Valuation of Financial Assets
(Chapters 5, 6, 7, 8, 9, 10)

Part 5

Liquidity Management and Special Topics in Finance
(Chapters 17, 18, 19, 20)

Part 3

Capital Budgeting (Chapters 11, 12, 13, 14)

C H A P T E R

1

Part 1

Getting Started
Principles of Finance
Chapter Outline
1.1

Finance: An Overview (pgs. 4–5)

1.2

Three Types of Business
Organizations (pgs. 5–9)

1.3

The Goal of the Financial
Manager (pgs. 9–11)

1.4

The Four Basic Principles
of Finance (pgs. 11–13)

Objective 1. Understand the importance of finance in
your personal and professional lives and identify the
three primary business decisions that financial
managers make.
Objective 2. Identify the key differences between the
three major legal forms of business.

Objective 3. Understand the role of the financial
manager within the firm and the goal for making
financial choices.

Objective 4. Explain the four principles of finance that
form the basis of financial management for both
businesses and individuals.

ISBN 1-256-14785-0
Financial Management: Principles and Applications, Eleventh Edition, by Sheridan Titman, John D. Martin, and Arthur J. Keown. Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

Principles

P

1,

P

2,

P

3, and

P

4 Applied

ISBN 1-256-14785-0

This book examines a wide range of financial decisions that people make in their business lives as well as in their personal lives. In this chapter, we lay a foundation for the entire book by describing the boundaries of the study of finance, the different ways that businesses are organized, and the role that the financial manager plays within the firm. We also address some of the

ethical dilemmas that the financial manager must face daily. Finally, we take an in-depth look at the four principles of finance, P Principle 1: Money Has a Time Value, P Principle 2: There
Is a Risk-Return Tradeoff, P Principle 3: Cash Flows Are the Source of Value, and P Principle 4: Market Prices Reflect Information, that underlie all financial decisions.

On any given day, Apple, Inc. (AAPL) will sell
P1
P2
P3
P4
thousands of 3G iPhones, iPods, iPads and
personal computers. In addition to a myriad
of production and pricing decisions, Apple
must evaluate potential new products,
make personnel choices, and consider new
locations for Apple retail stores. Since each
of these decisions affects the risk, timing,
and the amount of cash generated by Apple’s
operations, we can view all of them as financial
decisions.
Like Apple, you also face financial decisions in your personal life. Whether evaluating the terms of credit card offers or weighing whether to go to graduate school right after graduation or to work fulltime for a year or two, you will find that the same fundamental principles that guide business decisions are useful to you in making personal financial decisions.

Financial Management: Principles and Applications, Eleventh Edition, by Sheridan Titman, John D. Martin, and Arthur J. Keown. Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

3

4

PART 1

|

Introduction to Financial Management

Regardless of Your Major...
For the rest of your life, you will be both working and living in a world where you will be making choices that have financial consequences. Corporations make money by introducing new
products, opening new sales outlets, hiring the best people, and improving their productivity. All of these actions involve investing or spending money today with the hope of generating more money in the future. Regardless of your major, after graduation you are likely to be working for an organization where your choices have uncertain costs and benefits, both now and in the future. This will be the case if...
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