8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
1/31
Lesson 1Module: Financial Management
Lesson 1
Introduction to Financial
Management
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
2/31
Lesson 1Module: Financial Management
Key Concepts and Skills
Know the basic types of financialmanagement decisions and the role of theFinancial Manager
Know the financial implications of thevarious forms of business organization
Know the goal of financial management
Understand the conflicts of interest that can
arise between owners and managersUnderstand the various types of financial
markets
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
3/31
Lesson 1Module: Financial Management
Career opportunities infnance
Finance consists of three interrelated
areas:
Money and capital marketsInvestments
Financial management (business
finance) actual management of thefirm.
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
4/31
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
5/31
Lesson 1Module: Financial Management
Balance Sheet Model o theFirm
Current Assets
Fixed Assets
1 Tangible
2 Intangible
Total Value of Assets:
Shareholder
s Equity
Current
iabilities
ong!Ter"#ebt
Total Fir" Value to In$estors:
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
6/31
Lesson 1Module: Financial Management
The Role o The Financial
Manager "apital #udgeting $ecision
% $ecision to invest in tangible or intangible
assets&
'also called the Investment $ecision
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
7/31Lesson 1
Module: Financial Management
The Capital Budgeting Decision
Current Assets
Fixed Assets
1 Tangible
2 Intangible
Shareholder
s Equity
Current
iabilities
ong!Ter"#ebt
What long-terminvestments
should the firmchoose?
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
8/31
Lesson 1Module: Financial Management
The Role o The FinancialManager
Financing $ecision
% aising money that the firm needs for its
investments and operations&
"apital )tructure
% *he mi+ of long term debt and e,uity
financing&
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
9/31
Lesson 1Module: Financial Management
The Capital Structureecision
How should the
firm raise funds
for the selected
investments?
Current
Assets
Fied Assets
1 !angi"le
# $ntangi"le
%hareholders&
'(uit)
Current
Lia"ilities
Long-!erm*e"t
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
10/31
Lesson 1Module: Financial Management
Short!Term "ssetManagement
How should
short-term assets"e managed and
financed?
+et
Wor,ing
Caital
%hareholders&
'(uit)
Current
Lia"ilities
Long-!erm*e"t
Current
Assets
Fied Assets
1 !angi"le
# $ntangi"le
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
11/31
Lesson 1Module: Financial Management
Finan%ial
&anager
Fir"'s
o(erations In$estors
.1) Cash raised fro" in$estors
*1)
.#/ Cash in$ested in fir"
*2)
.0/ Cash generated by o(erations
*+)
.a) Cash rein$ested
*,a)
."/ Cash returned to in$estors
*,b)
The Role o The FinancialManager
-eal assets
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
12/31
Lesson 1Module: Financial Management
The fnancial manager#sresponsi$ilities
Forecasting and planning
Ma-or investment and financing
decisions
"oordination and control
$ealing with capital markets
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
13/31
Lesson 1Module: Financial Management
%hat is corporation&
It is a separate legal entity owned byshareholders
It is a ta!able entity
It has perpetual life It is able to combine the capital of
many shareholders
It has greater organi"ational andlegal costs
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
14/31
Lesson 1Module: Financial Management
%hat is a Corporation&
*ypes of "orporations
% .ublic "ompanies
% .rivate "orporations
% /imited /iability "orporations (//"
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
15/31
Lesson 1Module: Financial Management
Organizing a Business
*ypes of #usiness 0rganizations
% )ole .roprietorships
% .artnerships
% "orporations
% /imited /iability .artnerships
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
16/31
Lesson 1Module: Financial Management
Organizing a Business
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
17/31
Lesson 1Module: Financial Management
Corporate Structure
%ole 2rorietorshis
Cororations
2artnershis
Limited Lia"ilit)
Cororate ta on rofits 3
2ersonal ta on dividends
4nlimited Lia"ilit)
2ersonal ta on rofits
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
18/31
Lesson 1Module: Financial Management
The role of the nancialmanager
which assets the firm should ac,uire
how those assets should be financed
how the firm should manage its e+istingresources
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
19/31
Lesson 1Module: Financial Management
'ypothetical (rgani)ationChart
#hairman of the $oard and#hief %!ecutive &fficer (#%&)
'resident and #hief&perating &fficer (#&&)
ice 'resident and#hief Financial &fficer (#F&)
reasurer #ontroller
#ash Manager
#apital %!penditures
#redit Manager
Financial 'lanning
a! Manager
Financial *ccounting
#ost *ccounting
+ata 'rocessing
$oard of +irectors
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
20/31
Lesson 1Module: Financial Management
Who is The Financial Manager?
Chief Financial 5fficer
!reasurer Controller
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
21/31
Lesson 1Module: Financial Management
*oals o The Corporation
)hareholders desire wealthma+imization
$o managers ma+imize
shareholder wealth1 Mangers have many
constituencies 2stakeholders3
24gency .roblems3 representthe conflict of interest between
management and owners
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
22/31
Lesson 1Module: Financial Management
*oals o The Corporation
4gency .roblem )olutions
5 6 "ompensation plans
7 6 #oard of $irectors8 6 *akeovers
9 6 )pecialist Monitoring
: 6 4uditors
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
23/31
Lesson 1Module: Financial Management
Financial Markets
2rimar)
Mar,ets
%econdar)
Mar,ets
5!C
Mar,ets
Mone)
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
24/31
Lesson 1Module: Financial Management
Financial markets
.rimary market % the initial sale of
securities (also known as initial public
offering&
)ubse,uent sale of securities in
financial markets; between investors;
are in secondary market&
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
25/31
Lesson 1Module: Financial Management
Financial Markets
Financing $ecision
% )ource of Funds 2"apital3
% "apital )tructure
% Money Markets
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
26/31
Lesson 1Module: Financial Management
(ther fnancial markets
$ebt securities (contractual obligations
to pay are traded in the fixed-income
market or bond market
*he market for long6term debt and
e,uity securities is called the capital
market&
*he market for short6term; high ,uality;
li,uid debt securities is money market&
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
27/31
Lesson 1Module: Financial Management
Financial Markets
Coman)
$ssue *e"t
Cash$nvestors
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
28/31
Lesson 1Module: Financial Management
Financial Markets
Funds
Funds
6an,s
$nsurance Cos7
6ro,erage Firms
5"ligations
*eositors
2olic)holders
$nvestors
5"ligations
Coman)
$ntermediar)
$nvestor
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
29/31
Lesson 1Module: Financial Management
Financial Markets
6an,s
*eositors
8#79 mil
Cash
Loan
*eosits
Coman)
$ntermediar)
$nvestor
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
30/31
Lesson 1Module: Financial Management
Financial Markets
$nsurance
Coman)
2olic)holders
8#9 mil
Cash
Loan
%ell olicies
$ssue %toc,
Coman)
$ntermediar)
$nvestor
8/9/2019 Slides 1fmlecture1 111021124033 Phpapp01
31/31
Lesson 1
Top Related