An Overview of Financial Management参考.ppt

? 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part. ? 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part. ? 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part. An Overview of Financial Management Forms of Business Organization Balancing Shareholder Value and Society Interests Intrinsic Values, Stock Prices, and Managerial Incentives Important Business Trends Conflicts Between Managers, Stockholders, and Bondholders Chapter 1 1-* Finance Within the Organization 1-* Forms of Business Organization Proprietorship Partnership Corporation 1-* Proprietorships and Partnerships Advantages Ease of formation Subject to few regulations No corporate income taxes Disadvantages Difficult to raise capital Unlimited liability Limited life Often set up through LLCs/LLPs. 1-* Corporation Advantages Unlimited life Easy transfer of ownership Limited liability Ease of raising capital Disadvantages Double taxation Cost of setup and report filing 1-* Balancing Shareholder Value and Society Interests The primary financial goal of management is shareholder wealth maximization, which translates to maximizing stock price. Value of any asset is present value of cash flow stream to owners. Most significant decisions are evaluated in terms of their financial consequences. Stock prices change over time as conditions change and as investors obtain new information about a company’s prospects. Managers recognize that being socially responsible is not inconsistent with maximizing shareholder value. 1-* Stock Prices and Intrinsic Value In equilibrium, a stock’s price should equal its “true” or intrinsic value. Intrinsic value is a long-run concept. To the extent that investor perceptions are incorrect,