UB MGF 401 - chap001 (13 pages)

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chap001



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chap001

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Pages:
13
School:
University at Buffalo, The State University of New York
Course:
Mgf 401 - Financial Institutions
Unformatted text preview:

1 1 Chapter 1 Topics Covered Organizing a Business Goals of the Business Who Is the Financial Manager Investment and Financing Decisions McGraw Hill Irwin Copyright 2007 by The McGraw Hill Companies Inc All rights 1 2 Organizing a Business Types of Business Organizations Sole Proprietorships Partnerships Corporations Limited Liability Companies LLC McGraw Hill Irwin Copyright 2007 by The McGraw Hill Companies Inc All rights 1 3 Organizing a Business McGraw Hill Irwin Copyright 2007 by The McGraw Hill Companies Inc All rights 1 4 Liability Taxation Sole Proprietorships Partnerships Unlimited Liability Personal tax on profits Limited Liability Corporations Corporate tax on profits Personal tax on dividends LLC Limited Liability Personal tax on profits McGraw Hill Irwin Copyright 2007 by The McGraw Hill Companies Inc All rights 1 5 What is a Corporation Types of Corporations Public Corporation stock is publicly traded on stock exchange NYSE NASDAQ etc Private Corporation stock is held by limited number of stockholders and is not actively traded on stock exchange McGraw Hill Irwin Copyright 2007 by The McGraw Hill Companies Inc All rights 1 6 Goals of The Corporation Shareholders desire wealth maximization Do managers maximize shareholder wealth Managers have many constituencies stakeholders Agency Problems represent the conflict of interest between management and owners McGraw Hill Irwin Copyright 2007 by The McGraw Hill Companies Inc All rights 1 7 Goals of The Corporation Ethics Management Objectives Does value maximization justify unethical behavior Enron example hid 1 7 billion in losses using special accounting rules for off balance sheet operations WorldCom example overstated income by 3 8 billion McGraw Hill Irwin Copyright 2007 by The McGraw Hill Companies Inc All rights 1 8 Goals of The Corporation Agency Problem Solutions 1 Compensation plans 2 Board of Directors 3 Takeovers 4 Specialist Monitoring 5 Auditors McGraw Hill Irwin Copyright 2007 by The McGraw Hill Companies Inc All rights 1 9 Who is The Financial Manager Chief Financial Officer Treasurer Controller responsible for financing cash management works with financial markets responsible for budgeting McGraw Hill Irwin accounting taxes Copyright 2007 by The McGraw Hill Companies Inc All rights 1 10 The Role of The Financial Manager 2 Firm s operations Real assets 1 Financial Manager 4a Investors 4b 3 1 Cash raised from investors 2 Cash invested in firm 3 Cash generated by operations 4a Cash reinvested 4b Cash returned to investors McGraw Hill Irwin Copyright 2007 by The McGraw Hill Companies Inc All rights 1 11 The Role of The Financial Manager Capital Budgeting Decision Decision to invest in tangible or intangible assets also called the Investment Decision McGraw Hill Irwin Copyright 2007 by The McGraw Hill Companies Inc All rights 1 12 The Role of The Financial Manager Capital McGraw Hill Irwin Budgeting Tangible Assets Nontangible Assets Toyota in Texas Gillette s Mach3 Razor 800 million 300 million Copyright 2007 by The McGraw Hill Companies Inc All rights 1 13 The Role of The Financial Manager Financing Decision Raising money that the firm needs for its investments and operations Capital Structure The McGraw Hill Irwin mix of long term debt and equity financing Copyright 2007 by The McGraw Hill Companies Inc All rights


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