1	CHAPTER 1 An Overview of Financial Management Career Opportunities Issues of the New Millennium Forms of Businesses Goals of the Corporation Agency Relationships
2	Career Opportunities in Finance Money and capital markets: banks, ins.firms, mutual funds, investment banks --- valuation, i-rates, regulations, instruments Investments: brokerage house, banks, mutual funds, ins.firms, consulting firms --- sales, analysis, mix of portfolio Financial management : all businesses (retailers, industrials, schools, gov’t --- credit terms, inventory, cash, M&A, div.
3	Responsibility of the Financial Staff Maximize stock value by: Forecasting and planning Investment and financing decisions Coordination and control Transactions in the financial markets Managing risk
4	Role of Finance in a Typical Business Organization
5	Financial Management Issues of the New Millennium The effect of changing technology The globalization of business
6	Percentage of Revenue and Net Income from Overseas Operations for 10 Well-Known Corporations, 2001
7	Alternative Forms of Business Organization Sole proprietorship Partnership Corporation
8	Sole proprietorships & Partnerships Advantages Ease of formation Subject to few regulations No corporate income taxes Disadvantages Difficult to raise capital Unlimited liability Limited life
9	Corporation Advantages Unlimited life Easy transfer of ownership Limited liability Ease of raising capital Disadvantages Double taxation Cost of set-up and report filing
10	Financial Goals of the Corporation shareholder wealth maximization à maximizing stock price. Do firms have any responsibilities to society at large? Is stock price maximization good or bad for society? Should firms behave ethically?
11	Agency relationships principal vs. agent Within a corporation: Shareholders and managers Shareholders and creditors
12	Shareholders versus Managers Managers are inclined to act in their 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
13	Shareholders versus Creditors Shareholders (through managers) could take actions to maximize stock price that are detrimental to creditors. In the long run, such actions will raise the cost of debt and ultimately lower stock price.
14	Factors that affect stock price Cash flows: Projection Timing Riskiness
15	Factors that Affect the Level and Riskiness of Cash Flows Decisions made by financial managers: Investment decisions Financing decisions (the relative use of debt financing) Dividend policy decisions The external environment