1、Foundations of Financial Management第一頁，共四十頁。Part 1 IntroductionChapter 1 The Goals And Functions of Financial Management第二頁，共四十頁。2Summary This chapter traces the evolution and interrelationships of finance as a field of study and the role of the financial manager in a dynamic economy.第三頁，共四十頁。3Learn

2、ing Objectives 1. The field of finance integrates concepts from economics, accounting, and a number of other areas.2. The relationship of risk to return is a central focus of finance.3. The primary goal of financial managers is to maximize the wealth of the shareholders.第四頁，共四十頁。4Learning Objectives

3、 4. Financial managers attempt to achieve wealth maximization through daily activities such as credit and inventory management and through longer-term decisions related to raising funds.第五頁，共四十頁。5Learning Objectives5. Financial managers must carefully consider domestic and international business con

4、ditions in carrying out their responsibilities.6. Daily price changes in the financial markets provide feedback about a companys performance and help investors allocate their capital between firms.第六頁，共四十頁。61. The field of Finance. A. The field of finance is closely related to economics and accounti

5、ng.1. Economics provides a structure for decision-making in such areas as:a. Risk analysis.b. Price theory.c. Comparative return analysis.第七頁，共四十頁。71. The field of Finance. 2. Economics provides the broad picture of the economic environment including the:a. Institutional structure of the Federal Res

6、erve System.b. Commercial banking system.c. Interrelationships between various economic sectors.第八頁，共四十頁。81. The field of Finance. 3. Accounting, sometimes said to be the language of finance, provides financial data through income statements, balance sheets, and the statement of cash flows.4. Financ

7、e links economic theory with accounting data. All corporate managers must be familiar with such data in order to assess the financial performance of the firm.第九頁，共四十頁。91. The field of Finance. B. The demand for financial management skills exists in many sectors of a global society including corporat

8、e management, financial institutions, and consulting.第十頁，共四十頁。102. Finance as a field of study has evolved over time in response to changing business management needs.A. Finance achieved recognition as a separate field of study in response to the creation of giant corporations at the turn of the cen

9、tury.B. The worst depression in United States history caused a shift in emphasis from rapid merger growth to preservation of capital, liquidity, reorganization, and the bankruptcy process.第十一頁，共四十頁。112. Finance as a field of study has evolved over time in response to changing business management nee

10、ds.C. The most significant step in the evolution of contemporary financial management began in the mid-1950s.Emphasis was placed on the analytically determined employment of resources within the firm. The decision-making nature of financial management was manifested in the enthusiasm for the study o

11、f:第十二頁，共四十頁。122. Finance as a field of study has evolved over time in response to changing business management needs.1. Allocation of financial capital for the purchase of real capital (plant and equipment).2. Efficient utilization of current assets.3. Capital structure theory.4. Dividend policy.第十三

12、頁，共四十頁。132. Finance as a field of study has evolved over time in response to changing business management needs.D. The analytical orientation of financial management focused on risk-return relationships and the desire to maximize return at a given level of risk.E. The rapid inflation experienced in

13、the economy in the 1970s and early 1980s followed by a lengthy period of disinflation has impacted all areas of financial decision-making.第十四頁，共四十頁。142. Finance as a field of study has evolved over time in response to changing business management needs.F. The technological changes in the 1990s rapid

14、ly impacted the financial management functions of business firms. E-commerce accelerated cash flows and significantly affected the management of inventory and accounts receivable. Financial managers must remain sensitive to the impacts of e-commerce and the internet on finance functions in the 21st

15、century.第十五頁，共四十頁。153. Functions of Financial Management: A financial manager is responsible for financing an efficient level and composition of assets by obtaining financing through the most appropriate means.A. Daily financial management activities.1. Credit management.2. Inventory control.3. Rece

16、ipt and disbursement of funds.B. Less-routine activities.1. Sale of stocks and bonds.2. Capital budgeting.3. Dividend decisions.第十六頁，共四十頁。163. Functions of Financial Management: A financial manager is responsible for financing an efficient level and composition of assets by obtaining financing throu

17、gh the most appropriate means.C. Forms of organization: The finance function may be carried out within a number of different forms of organizations:1. Sole proprietorship.a. Single ownership.b. Simplicity of decision making.c. Low organizational and operating costs.d. Unlimited liability.e. Earnings

18、 of the proprietorship are taxed as personal earnings of the individual owner.第十七頁，共四十頁。173. Functions of Financial Management: A financial manager is responsible for financing an efficient level and composition of assets by obtaining financing through the most appropriate means.2. Partnership.a. Tw

19、o or more partners.b. Usually formed by articles of partnership agreement.c. Unlimited liability for all partners unless a limited partnership is formed which provides limited liability for one or more partners. At least one partner must be a general partner.d. Earnings are taxed as personal earning

20、s of partners.第十八頁，共四十頁。183. Functions of Financial Management: A financial manager is responsible for financing an efficient level and composition of assets by obtaining financing through the most appropriate means.3. Corporation.a. Most important form of business in terms of revenue and profits.b.

21、 Legal entity.c. Formed by articles of incorporation.d. Stockholders (owners) have limited liability.e. Easy divisibility of ownership.第十九頁，共四十頁。193. Functions of Financial Management: A financial manager is responsible for financing an efficient level and composition of assets by obtaining financin

22、g through the most appropriate means.3. Corporation.f. Managed by the board of directors.g. Double taxation of earnings: Earnings of the corporation are subject to the corporate income tax; dividends (distributed net income) are subject to personal taxation. Small subchapter S corporations, however,

23、 avoid the double taxation disadvantage.第二十頁，共四十頁。204. Goals of Financial Management.A. Are the goals of the three basic forms of business organizations the same? Does the management of a corporation make the same decision that a sole proprietor would make?B. Agency theory, a major area of financial

24、 research, focuses on the relationship between the owners of a firm and the managers of the firm.第二十一頁，共四十頁。214. Goals of Financial Management.C. Because of their large percentage of ownership, mutual funds and pension funds can influence the decisions of major U.S. companies.D. Alternative goals.1.

25、 Profit maximization (or maximizing earnings per share) has several drawbacks.a. Does not capture risk effects.b. Fails to consider the timing of the benefits.c. Variations in definitions of profit cause measurement problems.d. Inflation and international currency transactions complicate the issue.第

26、二十二頁，共四十頁。224. Goals of Financial Management.2. Maximization of owners wealth or shareholder wealth maximization if the firm is a corporation is the goal of the firm. Valuation is the key concept of this goal. The valuation process captures the timing of the expected cash flows and the risk associat

27、ed with the cash flows.第二十三頁，共四十頁。234. Goals of Financial Management.E. Incentives for management to act in the best interest of the owners (shareholders).1. The only way for management to maintain its position over the long run is to be sensitive to shareholder concerns.2. Stock option incentives.3

28、. Institutional influence.第二十四頁，共四十頁。245. Social Responsibility and Ethical Behavior.A. Is the goal of shareholder wealth maximization consistent with social responsibility?1. In most cases the answer is “yes”. Maximizing shareholder wealth attracts capital and provides employment and other benefits

29、 to the community (national, state, local, etc.).第二十五頁，共四十頁。255. Social Responsibility and Ethical Behavior.2. Some socially desirable actions may be less compatible with shareholder wealth maximization. For example, pollution controls, equitable hiring practices, and fair pricing standards may be i

30、n consistent with achieving maximum market value. Such actions may have to be mandatory.第二十六頁，共四十頁。265. Social Responsibility and Ethical Behavior.B. Unethical and/or illegal financial practices may lessen confidence in U.S. securities markets and made it more difficult for managers to maximize shar

31、eholder wealth. During the 1980s and 1990s, illegal insider trading activities made news headlines. Insider trading occurs when individuals seek to profit from trading using information that has not been made available to the public.第二十七頁，共四十頁。276. The Role of Financial Markets.A. Financial markets

32、are the meeting places for people, corporations, and institutions that either need money or have money to lend or invest.1. National, state, and local governments seek funds in public financial markets.2. Corporations raise funds in corporate financial markets.第二十八頁，共四十頁。286. The Role of Financial M

33、arkets.B. Financial markets may be classified in several ways.1. Domestic. 2. International.3. Corporate. 4. Government.5. Money and capital.a. Markets that focus on short-term securities that have a life of a year or less are called money markets.b. Capital markets are defined as markets where secu

34、rities have a life of more than one year. Capital markets are further classified as intermediate (1-10 years) and long-term (more than 10 years).第二十九頁，共四十頁。296. The Role of Financial Markets.C. Financial markets allocate capital to the highest bidder within a risk-return framework. Individuals posse

35、ssing capital seek to earn the highest rate of return at a given level of risk. Prices of securities in the market reflect the collective judgment of all participants. Securities price movements provide feedback to corporate managers indicating the markets evaluation of their activities. Corporation

36、s raise capital by selling new securities in the primary market. Securities previously sold by corporations trade in the secondary market between investors.第三十頁，共四十頁。306. The Role of Financial Markets.D. In addition to the pressure placed on corporate management through adjustment of securities pric

37、es, some investors seek to directly influence corporate boards of directors. Institutional investors have used their influence to bring about the restructuring of a number of firms. Restructuring may be manifested by a change in the capital structure of the firm, a merger or acquisition, selling off

38、 low-return divisions, reductions in the workforce, and even the removal of the existing management team.第三十一頁，共四十頁。316. The Role of Financial Markets.E. The internationalization of financial markets is necessary for the support of expanding international product markets. Modern corporate financial

39、managers must understand international capital flows, electronic funds transfer, foreign currency hedging strategies, and many other global trading factors.第三十二頁，共四十頁。326. The Role of Financial Markets.F. The internet and changes in the capital markets: Technology has significantly impacted capital

40、markets.1. Cost reduction for trading securities which has led to consolidations of markets and brokerage firms.2. Creation of new electronic markets.3. Internet trading provided by discount brokerage firms has forced full-service brokers to offer less profitable Internet trading to their clients.第三

41、十三頁，共四十頁。337. Format of the Text.A. Introduction: An examination of the goals of financial management within an analytical framework.B. Financial analysis and planning.1. Review of accounting relationships with finance.2. Ratio analysis.3. Construction of budgets and pro forma statements.4. Operating and financial leverage.第三十四頁，共四十頁。347. Format of the Text.C. Working capital management: Techniques for managing the levels of current assets and shot-term financing in a risk-return context.D. Capital budgeting and related valuation concepts.1. Time value of