The financial manager - ZoneCours


14 Δεκ 2012 (πριν από 4 χρόνια και 6 μήνες)

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97 : Basic Corporate Finance

Course outline

Overview of corporate finance

Definition of Corporate Finance

Forms of Business Organizations

Objectives of Financial Management

Financial Markets

HEC Montréal

Fall 2007

Know the basic types of financial management
decisions and the role of the financial

Know the financial implications of the
different forms of business organization

Know the goal of financial management

Understand the conflicts of interest that can
arise between owners and managers

Understand the various types of financial
markets and financial institutions

Understand current trends in Canadian
financial markets

HEC Montréal

Fall 2007

Three key questions


What long
term investments should the firm take on?

Where will we get the long
term financing to pay for the

How will we manage the everyday financial activities of
the firm?

HEC Montréal

Fall 2007

Financial managers try to answer some or all
of these questions

The top financial manager within a firm is
usually the Chief Financial Officer (CFO)


oversees cash management, capital
expenditures and financial planning


oversees taxes, cost accounting, financial
accounting and data processing

HEC Montréal

Fall 2007

Capital budgeting

What long
term investments or projects should the
business take on?

Capital structure

How should we pay for our assets?

Should we use debt or equity?

Working capital management

How do we manage the day
day finances of the

HEC Montréal

Fall 2007

Three major forms in Canada

Sole proprietorship

Easy to start (less regulated)

Single owner keeps all the profits + taxed once as personal income

Unlimited liability

Limited life and difficult to sell


Two or more owners

More capital available

Taxed once as personal income

Unlimited liability (general partnership) except for limited partnership

Limited life and difficult to transfer ownership


Limited liability

Unlimited life

Separation of ownership and management (could be good or bad)

Easier to raise capital

Transfer of ownership is easy

Double taxation

HEC Montréal

Fall 2007

HEC Montréal

Fall 2007

What should be the goal of a corporation?

Maximize profit?

Minimize costs?

Maximize market share?

Maximize the current value of the company’s stock?

Does this mean we should do anything and
everything to maximize owner wealth?

HEC Montréal

Fall 2007

Three equivalent goals of financial

Maximize shareholder wealth

Maximize share price

Maximize firm value

HEC Montréal

Fall 2007

Agency relationship

Principal hires an agent to represent their interests

Stockholders (principals) hire managers (agents) to
run the company

Agency problem

Conflicts of interest can exist between the principal
and the agent

Agency costs

Direct agency costs

Indirect agency costs

HEC Montréal

Fall 2007

Managerial compensation

Incentives can be used to align management and
stockholder interests

The incentives need to be structured carefully to
make sure that they achieve their goal

Corporate control

The threat of a takeover may result in better

Other stakeholders (clients, suppliers, etc)

HEC Montréal

Fall 2007

Investors are increasingly demanding that
corporations behave responsibly

Issues include how a corporation treats the
community in which it operates, their
customers, corporate governance, their
employees, the environment and human

Controversial business activities include
alcohol, gaming, genetic engineering, nuclear
power, pornography, tobacco and weapons

Social Responsibility and Ethical Investing

HEC Montréal

Fall 2007

Money vs. capital markets

Primary vs. secondary markets

Public vs. private company

HEC Montréal

Fall 2007

HEC Montréal

Fall 2007

Financial institutions act as intermediaries
between suppliers and users of funds

Institutions earn income on services provided:

Indirect finance

Earn interest on the spread between
loans and deposits

Direct finance

Service fees (i.e. bankers acceptance
and stamping fees)

HEC Montréal

Fall 2007

Financial Engineering

Derivative Securities

Advances in Technology


Corporate Governance Reform (Enron, Nortel,

HEC Montréal

Fall 2007