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Fin105 JTA-A

1st

Semester, SY 2011-2012

Aldo Tong

Financial Management

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Course Syllabus

atong@ateneo.edu

Consultation hours: by appointment

RemindersClass beadle

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http://www.groups.yahoo.com/group/jgsom_fin_tong

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NICKNAME FIN105 (Sec.)

Full Name

ID Number Course

BirthdayCellphone Number, Landline Number

Email address

High School

1) What grade do you plan to get for this course

2) What are you willing to do to get this grade.

3) What is investment?

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Forms of Business Organization

1. Sole Proprietorshipo an unincorporated business owned by

one individual

2. Partnershipo an unincorporated business owned by

two or more persons

3. Corporationo a legal entity created by a state,

separate and distinct from its ownersand managers

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Forms of Business Organization

SoleProprietorship

Partnership Corporation

Easy and inexpensive to form

Setting up and

accomplishing allrequirements canbecome complex

and time-

consuming

Few government operations

NO corporate income tax

Corporateearnings are

subject to double

taxation

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Forms of Business Organization

SoleProprietorship

Partnership Corporation

Difficult to obtain large sums ofcapital Easy to obtainadditional capital

Unlimited liability and limited lifeLimited liability

and unlimited life

-Difficult totransfer

ownership

Easytransferability of

ownership

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A O i f Fi i l

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An Overview of FinancialManagement

1. Money and Capital markets

2. Investments

3. Financial Management Decision making

How to raise capital

What to spend on

A O i f Fi i l

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An Overview of FinancialManagement

Trends Affecting Finance

BUSINESS ETHICSGLOBALIZATION

INFORMATION TECHNOLOGY

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Social Responsibility

Business should be actively concerned withthe welfare of society but this will entail cost

and might be disadvantageous

Business Ethics

A companys attitude and conduct toward itsemployees, customers, community and

stockholders

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Tasks of Financial Staff

1. Forecasting and planning2. Major investment and financing

decisions

3. Coordination and control4. Dealing with the financial markets5. Risk management

THE MAIN TASK IS TOMAXIMIZE THE VALUE OF THE

FIRM!

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Goal of the Corporation

Stockholder Wealth Maximization Primary goal for management decisions

Considers the risk and timing associatedwith expected earnings per share inorder to maximize the price of the firms

common stock

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The Agency Problem

A potential conflict of interests between

the agent (manager) and (1) the outside

stockholders or (2) the creditors

(debtholders)

This problem can be remedied by motivating

the managers to act in the best

interests of the stockholders.

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Shareholders versus Managers

Managers are naturally inclined to act intheir own best interests.

But the following factors affect

managerial behavior: Managerial compensation plans Direct intervention by shareholders The threat of firing The threat of takeover

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Shareholders versus Creditors

Shareholders (through managers) couldtake actions to maximize stock price thatare detrimental to creditors.

In the long run, such actions will raisethe cost of debt and ultimately lowerstock price.

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Financial Management

The intrinsic priceof a firms stockdepends on the cash flows paid to

shareholders, the timing of the cash

flows, and their riskiness. The leveland riskiness of cash flows are affectedby the financial environment as well

as by investment, financing, anddividend policy decisions made byfinancial managers.

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Basic Valuation Model

To estimate an assets value, oneestimates the cash flow for each period t

(CFt), the life of the asset (n), and theappropriate discount rate (k)

Throughout the course, we discuss howto estimate the inputs and how financial

management is used to improve them

n

1t t

t

n

n

2

2

1

1

.k)(1

CF

k)(1

CF

k)(1

CF

k)(1

CFValue

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