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    Fin Man - Notes

    Uploaded by

    Aleck Condes
    Notes for Financial Management

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    © All Rights Reserved
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    Fin Man - Notes

    Uploaded by

    Aleck Condes
    12 views2 pages
    Notes for Financial Management

    Original Title

    FIN MAN - NOTES

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    © © All Rights Reserved

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    Notes for Financial Management

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    12 views2 pages

    Fin Man - Notes

    Uploaded by

    Aleck Condes
    Notes for Financial Management

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 2

    CHAPTER 1 PART 2

    Introduction to Financial Management A: Jobs in Finance


    ● Ownership Structure  Banking
    ○ East Asian: Few institutional investors  Investments
     Insurance
    ○ West:
     Corporation
    ● Cross Holdings  Government
    ○ East asian hold one another’s shares called PART 3
    “Keiretsu” Forms of Business Organization
    ■ Indirectly under common of firm A Type of Advantages Disadvantages
    ● Pyramidal Structure Business
    ○ Consists of a group with a top-down chain Proprietorships 1. Easy and 1. Unlimited personal liability
    Owned by one Inexpensive 2. Limited to the life of the
    ownership control individual 2. Few regulations individual
    3. Lower income 3. Difficult getting capital
    PART 1 taxes
    A. What is Finance? Partnerships 1. Pro-rata income 1. Subject to unlimited personal
    to be taxed liability
    Finance: system that includes the circulation of money, Legal arrangement
    individually to
    between two or more
    the granting of credit, the making of investments, and the people avoid corporate
    provision of banking facilities income tax

    Corporations 1. Unlimited life 1. High taxes (double)


    Areas of Finance Legal entity created 2. Limited Liability S Corps: same as prop and
    Divided Into Three Areas: by a state and 3. High capital partnership and private
    separate 100 holders
    1. Financial Management: corporate finance that
    focuses on decision making C Corps: large groups and public
    Limited 1. Limited liability
    a. How much and what assets to acquire 2. Taxed as
    b. How to raise capital Liability partnerships
    c. How to run a firm Companies 3 Investors vote
    (LCCs)
    Hybrid od partnership
    2. Capital Markets: markets where interest rates and corporation
    and stock and bond prices are determined
    Limited Liability: reduce risk born to investors
    3. Investments: decisions concerning stocks and Firm’s Value: dependent on growth opportunities which
    bonds depend on capital attraction
    a. Security Analysis - proper value of Value of an Asset: dependent on liquidity
    securities
    b. Portfolio Theory - best way to structure PART 4
    portfolios “baskets”
    The Main Financial Goal: Creating Value for Inv.
    c. Market Analysis - issuance with prices as
    “too high/low/about right”
    A. Determinants of Value
    i. Behavioral Finance
    1st Row: Influence level and risk of future cash flows for
    B. Finance within an Organization <
    stock prices
    Usually has an organization chart
    ● Board of Directors: top governing body
    Managerial Actions | Economic Environment | Taxes |
    chairperson at the top
    Political Climate
    ● Chief Executive Officer (CEO)
    ● Chief Operating Officer (COO) usually a
    2nd Row: The Investors Expectations
    firm’s president
    “true” if they have the information
    ● Chief Financial Officer (CFO) senior VP and
    “perceived” if they have limited information
    third in rank
    “True/Perceived” Cas Flows | “True/Perceived”
    If the firm if public, CEO and CFO must certify to SEC
    Risk”
    required by the Sarbanes-Oxley Act
    3rd Row:
    C. Finance vs. Economics and Accounting <
    Intrinsic value estimate of stock’s true value
    Finances comes from Economics and Accounting
    Market Price actual market price seen by the Marginal
    Economists: asset’s value is based on Future CF assets
    Investor
    will provide
    Equilibrium actual price and intrinsic value is same
    Accountants: provide the likelihood
    Market Equilibrium:
    Intrinsic Valie = Stock Price
    B. Intrinsic Value
    These are estimates but we can’t check if they are right
     Management should set a goal to increase
    intrinsic value not the current

    C. Consequences of Having a Short-Run Focus


    Caused employees to abuse the system therefore the need
    for effective procedures for corporate governance is
    required

    Corporate Governance: establishment of rules which are


    made by the Board

    PART 5
    Stockholder-Manager Conflicts

    A. Compensation Packages
    B. Direct Stockholder Intervention
    C. Managers’ Response
    PART 6
    Stockholder-Debtholder Conflicts

    PART 7
    Balancing Shareholder Interest and the Interest of
    Society
    PART 8
    Business Ethics

    A. What Companies are Doing


    B. Consequences of Unethical Behavior
    C. How Should Employees Deal with Unethical
    Behavior

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