2. What is Corporate Finance
Is
the Study of ways to answer the
following 3 questions:
1) What long term investments should you
take on
2) Where will you get the long term financing
to pay for your investment?
3) How will you manage your everyday
financial activities such as collecting from
customers and paying suppliers
4. Forms of Business Organization
Sole
Proprietorship
Partnership
Corporation
5. The goal of Financial Management
Possible goals: - Survive
- Avoid financial distress & bankruptcy
- Beat the competition
- Maximize sales or market share
- Minimize costs
- Maximize profits
- Maintain steady earnings growth
The goal of financial management is to maximize the
current value per share of the existing stock
6. Sarbanes - oxley
Agency
-
problem & control of the
corporation
Agency relationships
Management goals
Do managers act in the stockholder’s
interests?
Managerial compensation
Control of the firm
7. Financial Markets & the Corporation
Cash
Flows to & from the Firm
Primary versus secondary markets
- Primary Markets
- Secondary markets
- Dealer versus Auction markets
- Trading in Corporate securities
- Listing
8. Financial Statements, Taxes, & Cash Flows
The Balance Sheet
The Net working Capital
Liquidity
Debt versus Equity
Market value versus book value
9. The Income Statement
GAAP
& the Income statement
Non cash items
Time & Costs
Taxes
Corporate
Average versus Marginal Tax Rates
10. Cash Flow
Cash
Flow from Assets
Operating Cash flow
Capital Spending
Change in Net Working Capital
11. Qs)
Based on the following information for
Sunderam Corporation, prepare an
income statement for 2007 & 2008.
Calculate cash flow to creditors, & cash
flow to stock holders for 2008. Use a 30 %
tax rate throughout.
12. Sales
Cost of goods sold
Depreciation
Interest
Dividends
Current Assets
Net fixed Assets
Current Liabilities
Long term debt
2007
4205
2425
790
185
230
2210
7360
1010
3110
2008
4550
2640
960
200
255
2500
7700
1280
2100
13. Working with Financial Statement
Cash flow & Financial Statements:
Sources &Uses of Cash
The statement of cash flows
Standardized financial Statements
Common size statements
- Common size Balance sheet
- Common size income statement
- Common – size statements of cash flows
15. Qs)
The Balance sheet of ABC Ltd is
given: Calculate the changes in the
various accounts & where ever applicable,
identify the change as a source or use of
cash. Did the company become more or
less liquid during the year?
16. Long-term Financial planning & growth
Effective long-range planning
The firm’s needed investment in new assets
The degree of financial leverage the firm chooses to
employ
The amount of cash the firm thinks is necessary and
appropriate to pay shareholders
The amount of liquidity & working capital the firm needs
on an ongoing basis
17. What is Financial Planning?
Growth
as a financial Management Goal
Dimensions of Financial Planning
What can planning accomplish?
- Examining Interactions
- Exploring Options
- Avoiding Options
- Ensuring Feasibility & internal Consistency
18. Financial Planning Models
Ingredients of a financial Planning Model:
Sales Forecast
Pro Forma Statements
Asset Requirements
Financial requirements
The plug
Economic Assumptions
19. Financial Policy & Growth
Internal
growth Rate
The sustainable growth rate
Determinants of Growth
- Profit Margin
- Dividend Policy
- Financial policy
- Total Asset Turnover
If a firm does not wish to sell new equity and its profit
margin, dividend policy, financial policy, & total
asset turnover are all fixed, then there is only one
possible growth rate .