This document provides an outline of Chapter 1 from a financial management textbook. It defines key terms in finance such as short-term and long-term financing decisions, risk-return trade-off, and different forms of organization. Economics is closely related to finance and provides tools for decision making, including risk analysis, pricing theory, and comparative return analysis. It also gives a broad picture of the economic environment and important economic variables that impact financial decisions.
3. Chapter 1 – Outline
• Definition of Finance
• Short-Term vs. Long-Term Financing Decisions
• Risk-Return Trade-Off
• Financial vs. Real Capital
• Stocks vs. Bonds
• Forms of Organization
5. Economics provides a structure for decision making in areas
such as
– Risk analysis
– Pricing theory
– Comparative return analysis
6. Economics gives us a broad picture of economic environment,
which includes
– Federal Reserve and banking system
– Economic variables
• Gross Domestic Product
• Industrial Production
• Disposable Income
• Unemployment
• Inflation
• Interest rates
• Taxes
