introduction to corporate finance

1. Chapter 1
Principles
of
Corporate
Finance
Ninth Edition
Finance and The
Financial Manager
Slides by
Matthew Will
Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved
McGraw Hill/Irwin

2. 1- 2
Topics Covered
What Is A Corporation?
The Role of The Financial Manager
Who Is The Financial Manager?
Separation of Ownership and Management

3. 1- 3
Corporate Structure
Sole Proprietorships
Corporations
Partnerships
Limited Liability
Corporate tax on profits +
Personal tax on dividends
Unlimited Liability
Personal tax on profits

4. 1- 4
Sole
Proprietorship
Partnership Corporation
Who owns the
business?
The manager Partners Shareholders
Are managers
and owners
separate?
No No Usually
What is the
owner’s
liability?
Unlimited Unlimited Limited
Are the owner
& business
taxed
separately?
No No Yes
Organizing a Business

5. 1- 5
Financial Market Functions
Source of funding
Investor liquidity
Risk management
Source of information

6. 1- 6
Role of The Financial Manager
Financial
manager
Firm's
operations
Financial
markets
(1) Cash raised from investors
(1)
(2) Cash invested in firm
(2)
(3) Cash generated by operations
(3)
(4a) Cash reinvested
(4a)
(4b) Cash returned to investors
(4b)

7. 1- 7
Role of The Financial Manager
 Common Finance Terminology
– Real assets
– Financial assets / Securities
– Capital markets and financial
markets
– Investment / capital budgeting
– Financing

8. 1- 8
Who is The Financial Manager?
Chief Financial Officer
Controller
Treasurer

9. 1- 9
Ownership vs. Management
Difference in Information
 Stock prices and returns
 Issues of shares and
other securities
 Dividends
 Financing
Different Objectives
 Managers vs.
stockholders
 Top mgmt vs.
operating mgmt
 Stockholders vs. banks
and lenders

10. 1- 10
Web Resources
www.careers-in-finance.com/
www.careers.wsj.com/
http://www.wageweb.com
www.corpgov.net
www.thecorporatelibrary.com
Click to access web sites
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