Finance and the Financial Manager

1.

Principles of
Corporate
Finance
Seventh Edition
Chapter 1
Finance and the Financial
Manager
Richard A. Brealey
Stewart C. Myers
Slides by
Matthew Will
McGraw Hill/Irwin
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved

2. Topics Covered

1- 2
Topics Covered
What Is A Corporation?
The Role of The Financial Manager
Who Is The Financial Manager?
Separation of Ownership and Management
Financial Markets
McGraw Hill/Irwin
Irwin/McGraw
Hill
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved

3. Corporate Structure

1- 3
Corporate Structure
Sole Proprietorships
Unlimited Liability
Personal tax on profits
Partnerships
Limited Liability
Corporations
Corporate tax on profits +
Personal tax on dividends
McGraw Hill/Irwin
Irwin/McGraw
Hill
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved

4. Role of The Financial Manager

1- 4
Role of The Financial Manager
(2)
(1)
Financial
manager
Firm's
operations
(4a)
Financial
markets
(4b)
(3)
(1) Cash raised from investors
(2) Cash invested in firm
(3) Cash generated by operations
(4a) Cash reinvested
(4b) Cash returned to investors
McGraw Hill/Irwin
Irwin/McGraw
Hill
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved

5. Who is The Financial Manager?

1- 5
Who is The Financial Manager?
Chief Financial Officer
Treasurer
McGraw Hill/Irwin
Irwin/McGraw
Hill
Comptroller
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved

6. Ownership vs. Management

1- 6
Ownership vs. Management
Difference in Information
Different Objectives
Stock prices and returns Managers vs.
stockholders
Issues of shares and
other securities
Top mgmt vs. operating
mgmt
Dividends
Stockholders vs. banks
Financing
and lenders
McGraw Hill/Irwin
Irwin/McGraw
Hill
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved