公司理财（第4版）全套PPT课件.pptx

Chapter 1The Finance Function Two key conceptsRelationship between risk and returnTime value of money Risk and returnRisk refers to the possibility that actual outcome may differ from expected outcome.Risk can be measured by standard deviation.Investors require increasing compensation (return) for taking on increasing risk.Return on an investment can be measured over a standard period, such as one year. Risk and returnShareholder return is annual dividend (D1) plus share price increase (P1 – P0).Relative return in percentage terms is100 x [(P1 – P0) + D1]/P0This is called total shareholder return. Future values: compoundingInvest ￡100 now at 5% interest per year. After 1 year: ￡105.00 (100 x 1.05) After 2 years: ￡110.25 (105 x 1.05)These are future values of ￡100 after 1 and 2 years.Future values are found by compounding interest forward through time. Present values: discountingWhat sum of money invested now at 5% will give ￡120 in 2 years’ time?This will be ￡120/1.052 = ￡108.84.This is the present value of ￡120 receivedin two years if your required rate of returnis 5%.Dividing by 1.052 to find a present value is called discounting. Present values: discountingA rational investor will prefer ￡108.84 to ￡100 at the current time.Discounting allows us to compare ￡120 in two years’ time with ￡100 now.Note that 1/1.052 = 0.907.0.907 is the present value factor or discount factor of 5% over 2 years (see tables).Hence ￡120 x 0.907 = ￡108.84. Decision-making areas A financial manager’s tasks can be divided into 3 areas:Financing decisionsDividend decisionsInvestment decisions Key point: appreciate the interrelationship of these 3 decision areas The financial managerWho is the financial manager in reality? Finance Director(strategic decision making)Corporate Treasurer(day-to-day cash management) Possible corporate objectivesShareholder wealth maximisation (SHWM)Maximisation of profitMaximisation of salesSurvivalSocial responsibility Which one should we follow? Shareholder