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CHAPTE !An "vervie# o$ %inancial &anage'ent

ole o$ $inancial 'anage'ent

Career opportunities

%or's o$ business organi(ation

)oals o$ the corporationIssues o$ the ne# 'illeniu'

Agency relationships

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*hat causes a co'pany to have a particular stoc+value

Ho# can 'anagers 'a+e choices that add value totheir co'panies

Ho# can 'anagers ensure that their co'panies don-trun out o$ cash #hile eecuting their plans

*hat three /uestions does $inancial

'anage'ent see+ to ans#er

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ole proprietorship

Partnership

Corporation

Alternative %or's o$

1usiness "rgani(ation

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Advantages

Ease o$ $or'ation

ub3ect to $e# regulations4o corporate inco'e taes

5isadvantages

6i'ited li$e

7nli'ited liability

5i$$icult to raise capital

ole Proprietorship

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A partnership has roughly the sa'eadvantages and disadvantages as asole proprietorship.

Partnership

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Advantages

7nli'ited li$e

Easy trans$er o$ o#nership6i'ited liability

Ease o$ raising capital

5isadvantages5ouble taation

Cost o$ set8up and report $iling

Corporation

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The pri'ary goal is shareholder #ealth'ai'i(ation, #hich translates to

'ai'i(ing stoc+ price.hould $ir's behave ethically 9E:

5o $ir's have any responsibilities to

society at large9E: hareholdersare also 'e'bers o$ society.

)oals o$ the Corporation

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Is 'ai'i(ing stoc+ price good $or

society, e'ployees, and custo'ersE'ploy'ent gro#th is higher in $ir's

that try to 'ai'i(e stoc+ price. "n

average, e'ploy'ent goes up in$ir's that 'a+e 'anagers into

o#ners ;such as 61" $ir's