Overview of Financial Management and the Financial Environment课件.ppt

CHAPTER 1Overview of Financial Management and the Financial Environment;Why is corporate finance important to all managers?;Sole proprietorship Partnership Corporation;Advantages: Ease of formation Subject to few regulations No corporate income taxes Disadvantages: Limited life Unlimited liability Difficult to raise capital to support growth;A partnership has roughly the same advantages and disadvantages as a sole proprietorship.;Becoming a Corporation;Advantages: Unlimited life Easy transfer of ownership Limited liability Ease of raising capital Disadvantages: Double taxation Cost of set-up and report filing;Becoming a Public Corporation and Growing Afterwards;The primary objective should be shareholder wealth maximization, which translates to maximizing stock price. Should firms behave ethically? YES! Do firms have any responsibilities to society at large? YES! Shareholders are also members of society.;It is a company’s ability to generate cash flows now and in the future. What three aspects of cash flows affect an investment’s value? 1. Amount of expected cash flows (bigger is better) 2. Timing of the cash flow stream (sooner is better) 3. Risk of the cash flows (less risk is better);What are “free cash flows (FCF)”;What is the weighted average cost of capital (WACC)? ;What determines a firm’s value?;What are financial assets?;Who are the providers (savers) and users (borrowers) of capital?;Direct transfer (e.g., corporation issues commercial paper to insurance company) Through an investment banking house (e.g., IPO, seasoned equity offering, or debt placement) Through a financial intermediary (e.g., individual deposits money in bank, bank makes commercial loan to a company);Commercial banks Savings Loans Life insurance companies Mutual funds Pension funds ;What are some types of markets?;How are secondary markets organized?;Physical Location vs. Computer/telephone Networks;Auction Markets;Dealer Markets;Electronic Communications Networks (ECNs);Over the