08 28 2012 Finance Chapter 1 Goals of the Corporation Make money Corporate social responsibility Brand recognition Profit maximization Gaining market share Retain and reward talented employees Customer satisfaction Ultimate goal o Shareholder wealth maximization Corporate Governance Slide 11 The relationship between the board the managers and the shareholders The board can offer managerial compensation or incentives o They are given stock options o This is somewhat effective Direct intervention by shareholders Financial Statements Cash Flow and Taxes 08 28 2012 Balance sheets Show assets and liabilities at a certain point in time Assets o listed in order of liquidity o Intangible assets Patents and trademarks o Amortization Depreciation for intangible assets o Capital expenditure Most companies use 700 000 Used for 7 10 years o Depreciation Allows you to pay a chunk of the cost each year Huge tax benefit Earnings per Share Net income Number of shares Statement of Cash Flows Operating activities Investing activities Financing activities NOPAT Net operating profit after taxes EBIT 1 TaxRate o Step 1 o Step 2 NOPAT Change in operating capital Capital Expenditures change Net Working Capital OC Working Capital Net Fixed Assets WC Current Assets Current Liabilities Cash A R Inventories A P Accruals Free Cash Flow 08 28 2012