The financial manager - ZoneCours

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14 Δεκ 2012 (πριν από 4 χρόνια και 11 μήνες)

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2
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208
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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
manager


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
investment?


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)



Treasurer


oversees cash management, capital
expenditures and financial planning



Controller


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
-
to
-
day finances of the
firm?



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



Partenership


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



Corporation


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
management:



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
management



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
rights


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


Deregulation


Corporate Governance Reform (Enron, Nortel,
etc)

HEC Montréal


Fall 2007