1、Chapter 1Introduction to Corporate FinanceCopyright 2021 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.Key Concepts and SkillsKnow the basic types of financial management decisions and the role of the financial managerKnow the financial implications of the different forms

2、of business organizationKnow the goal of financial managementUnderstand the conflicts of interest that can arise between owners and managersUnderstand the various types of financial markets.Chapter OutlineCorporate Finance and the Financial ManagerForms of Business OrganizationThe Goal of Financial

3、ManagementThe Agency Problem and Control of the CorporationFinancial Markets and the Corporation.Corporate FinanceSome important questions that are answered using finance:What long-term investments should the firm take on?Where will we get the long-term financing to pay for the investment?How will w

4、e manage the everyday financial activities of the firm?.5Balance Sheet Model of the FirmCurrent AssetsFixed Assets1 Tangible 2 IntangibleTotal Value of Assets:Shareholders EquityCurrent LiabilitiesLong-Term DebtTotal Firm Value to Investors:.6The Capital Budgeting DecisionCurrent AssetsFixed Assets1

5、 Tangible 2IntangibleShareholders EquityCurrent LiabilitiesLong-Term DebtWhat long-term investments should the firm choose?.7The Capital Structure DecisionHow should the firm raise funds for the selected investments?Current AssetsFixed Assets1 Tangible 2 IntangibleShareholders EquityCurrent Liabilit

6、iesLong-Term Debt.8Short-Term Asset ManagementHow should short-term assets be managed and financed?Net Working CapitalShareholders EquityCurrent LiabilitiesLong-Term DebtCurrent AssetsFixed Assets1 Tangible 2 Intangible.A.Deciding when to repay a long-term debtB.Determining how much inventory to kee

7、p on handC.Determining how much debt should be borrowed from a particular lenderD.Deciding whether or not to open a new storeE.Determining how much money should be kept in the checking accountWhich one of the following is a capital budgeting decision?1-9.I. accounts payableII. accounts receivableIII

8、. long-term debtIV. inventoryA.I and II onlyB.I and III onlyC.II and IV onlyD.I, II, and IV onlyE.I, III, and IV onlyWorking capital management includes decisions concerning which of the following?1-10.Financial ManagerFinancial managers try to answer some or all of these questionsThe top financial

9、manager within a firm is usually the Chief Financial Officer (CFO)Treasurer oversees cash management, credit management, capital expenditures, and financial planningController oversees taxes, cost accounting, financial accounting and data processing.1-12Hypothetical Organization ChartChairman of the

10、 Board and Chief Executive Officer (CEO)President and Chief Operating Officer (COO)Vice President and Chief Financial Officer (CFO)TreasurerControllerCash ManagerCapital ExpendituresCredit ManagerFinancial PlanningTax ManagerFinancial AccountingCost Accounting Data Processing Board of Directors.1.Th

11、e person generally directly responsible for overseeing the tax management, cost accounting, financial accounting, and information system functions is the:A.chairman of the board.B.director.C.chief executive officer.D.treasurer.E.controller.2.The person generally directly responsible for overseeing t

12、he cash and credit functions, financial planning, and capital expenditures is the:1-13.Which of the following questions are addressed by financial managers?I. How should a product be marketed?II. Should customers be given 30 or 45 days to pay for their credit purchases?III. Should the firm borrow mo

13、re money?IV. Should the firm acquire new equipment?.Financial Management DecisionsCapital budgetingWhat long-term investments or projects should the business take on?Capital structureHow should we pay for our assets?Should we use debt or equity?Working capital managementHow do we manage the day-to-d

14、ay finances of the firm?.Forms of Business OrganizationThree major forms in the United StatesSole ProprietorshipPartnershipGeneralLimitedCorporationLimited Liability Company.Sole ProprietorshipAdvantagesEasiest to startLeast regulatedSingle owner keeps all the profitsTaxed once as personal incomeDis

15、advantagesLimited to life of ownerEquity capital limited to owners personal wealthUnlimited liabilityDifficult to sell ownership interest.PartnershipAdvantagesTwo or more ownersMore capital availableRelatively easy to startIncome taxed once as personal incomeDisadvantagesUnlimited liabilityGeneral p

16、artnershipLimited partnershipPartnership dissolves when one partner dies or wishes to sellDifficult to transfer ownership.CorporationAdvantagesLimited liabilityUnlimited lifeSeparation of ownership and managementTransfer of ownership is easyEasier to raise capitalDisadvantagesDouble taxation (income

17、 taxed at the corporate rate and then dividends taxed at the personal rate).I. limited life of the firmII. personal liability for firm debtIII. greater ability to raise capital than a sole proprietorshipIV. lack of ability to transfer partnership interestA.I and II onlyB.III and IV onlyC.II and III

18、onlyD.I, II, and IV onlyE.I, III, and IV onlyWhich of the following are disadvantages of a partnership?1-20.I. limited liability for firm debtII. double taxationIII. ability to raise capitalIV. unlimited firm lifeA.I and II onlyB.III and IV onlyC.I, II, and III onlyD.II, III, and IV onlyE.I, III, an

19、d IV onlyWhich of the following are advantages of the corporate form of business ownership?1-21.Goal of Financial ManagementWhat should be the goal of a corporation?Maximize profit?Minimize costs?Maximize market share?Maximize the current value of the companys stock?Does this mean we should do anyth

20、ing and everything to maximize owner wealth?.The Agency ProblemAgency relationshipPrincipal hires an agent to represent his/her interestsStockholders (principals) hire managers (agents) to run the companyAgency problemConflict of interest between principal and agentManagement goals and agency costs.

21、A.Increasing current costs in order to increase the market value of the stockholders equityB.Agreeing to expand the company at the expense of stockholders valueC.Refusing to lower selling prices if doing so will reduce the net profitsD.Agreeing to pay bonuses based on the book value of the company s

22、tockE.Refusing to borrow money when doing so will create losses for the firmWhich one of the following actions by a financial manager creates an agency problem?1-24.Managing ManagersManagerial compensationIncentives can be used to align management and stockholder interestsThe incentives need to be s

23、tructured carefully to make sure that they achieve their goalCorporate controlThe threat of a takeover may result in better managementOther stakeholders.Work the Web ExampleThe Internet provides a wealth of information about individual companiesOne excellent site is finance.yahooClick on the web surfer to go to the site, choose a company and see what information you can find!.Financial MarketsCash flows to and from the firmPrimary vs. secondary marketsDealer vs. auction marketsListed vs. over-the-counter securitiesNYSENASDAQ.Quick QuizWhat are the three types o