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Goal of the firm ppt @ mba

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Goal of the firm ppt @ mba

Goal of the firm ppt @ mba

Published in: Economy & Finance, Business

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  • 1. Goal of the Firm 1) Profit Maximization? this goal ignores: a) TIMING of Returns (Time Value of Money - Ch. 5) b) UNCERTAINTY of Returns (Risk - Ch. 6)
  • 2. Goal of the Firm 2) Shareholder Wealth Maximization? this is the same as: a) Maximizing Firm Value b) Maximizing Stock Price
  • 3. Legal Forms of Business 1) Sole Proprietorship  A business owned by a single individual.  Owner maintains title to the firm’s assets.  Owner has unlimited liability. 2) Partnership  Similar to a sole proprietorship, except that there are two or more owners.
  • 4. 2a) General Partnership  All partners have unlimited liability. 2b) Limited Partnership  Consists of one or more general partners, who have unlimited liability.  One or more limited partners (investors) whose liability is limited to the amount of their investment in the business. Legal Forms of Business
  • 5. 2c) Limited Liability Company (LLC)  Cross between a partnership and a corporation.  Owners have limited liability, but the firm runs and is taxed like a partnership. Legal Forms of Business
  • 6. 3) Corporation  A business entity that legally functions separate and apart from its owners.  Owners’ liability is limited to the amount of their investment in the firm.  Owners hold common stock certificates, and ownership can be transferred by selling the certificates. Legal Forms of Business
  • 7. The Corporation and Financial Markets
  • 8. The Corporation and Financial Markets Corporation
  • 9. The Corporation and Financial Markets Corporation Investors
  • 10. The Corporation and Financial Markets Government Corporation Investors
  • 11. The Corporation and Financial Markets cash Government Corporation Investors
  • 12. The Corporation and Financial Markets cash Government securities Corporation Investors
  • 13. The Corporation and Financial Markets Government cash securities Corporation Investors Secondary markets
  • 14. The Corporation and Financial Markets Government cash securities Corporation Investors Secondary markets
  • 15. The Corporation and Financial Markets Government cash securities Corporation Investors Secondary markets
  • 16. The Corporation and Financial Markets cash Investors Secondary markets Government securities Cash flow Corporation
  • 17. The Corporation and Financial Markets cash Investors Secondary markets Government securities Cash flow tax Corporation
  • 18. The Corporation and Financial Markets cash Investors Secondary markets Government securities Cash flow reinvest tax Corporation
  • 19. The Corporation and Financial Markets cash Investors Secondary markets Government securities Cash flow reinvest tax Corporation dividends, etc.
  • 20. The Corporation and Financial Markets  Primary Market
  • 21.  Primary Market  Market in which new issues of a security are sold to initial buyers. The Corporation and Financial Markets
  • 22.  Primary Market  Market in which new issues of a security are sold to initial buyers.  Secondary Market The Corporation and Financial Markets
  • 23.  Primary Market  Market in which new issues of a security are sold to initial buyers.  Secondary Market  Market in which previously issued securities are traded. The Corporation and Financial Markets
  • 24.  Initial Public Offering (IPO) The Corporation and Financial Markets
  • 25.  Initial Public Offering (IPO)  The first time the firm’s stock is sold to the general public. The Corporation and Financial Markets
  • 26.  Initial Public Offering (IPO)  The first time the firm’s stock is sold to the general public.  Seasoned New Issue The Corporation and Financial Markets
  • 27.  Initial Public Offering (IPO)  The first time the firm’s stock is sold to the general public.  Seasoned New Issue  A new stock offering by a firm that already has stock that is traded in the secondary market. The Corporation and Financial Markets
  • 28. Financial Management Axioms 1) Risk - return trade-off. 2) Time value of money. 3) Cash - not profits - is king. 4) Incremental cash flows count. 5) The curse of competitive markets. 6) Efficient capital markets. 7) The agency problem. 8) Taxes bias business decisions. 9) All risk is not equal.