1、Introduction to Financial Management Chapter 1Chapter OutlinelFinance:A Quick LooklFinancial ManagerlForms of Business OrganizationlThe Goal of Financial ManagementlThe Agency Problem and Control of the CorporationlFinancial Markets and the CorporationBasic Areas Of FinanceCorporate financeInvestmen
2、tsFinancial institutionsInternational financeInvestmentsWork with financial assets such as stocks and bondsValue of financial assets,risk versus return and asset allocationJob opportunitiesStockbroker or financial advisorPortfolio managerSecurity analystFinancial InstitutionslCompanies that speciali
3、ze in financial matterslBanks commercial and investment,credit unions,savings and loanslInsurance companieslJob opportunitiesBanks in China1.Central bank:PBC ruling rate of interest;treasury;foreign reserve;settlement2.Three policy banks:The export-import bank of China;China development bank;Agricul
4、ture development bank of China3.Four state-owned banks:CBC(CCB);BC;ABC;ICBC4.Stock-holding banks:Former five top investment bankslGoldman SachslMorgan StanleylLehman Brother lMerrill LynchlBear SteamInternational FinancelThis is an extended area of the above areas discussed in the international scop
5、e.lIt may allow you to work in other countries or at least travel on a regular basislNeed to be familiar with exchange rates and political risklNeed to understand the customs of other countries and speaking a foreign language fluently is also helpfulFinancial managementlSome important questions that
6、 are answered using financelWhat long-term investments should the firm take on?lWhere will we get the long-term financing to pay for the investment?lHow will we manage the everyday financial activities of the firm?Financial ManagerlFinancial managers try to answer some or all of these questionslThe
7、top financial manager within a firm is usually the Chief Financial Officer(CFO)lTreasurer oversees cash management,credit management,capital expenditures and financial planninglController oversees taxes,cost accounting,financial accounting and data processingFinancial Management DecisionslCapital bu
8、dgeting(investment decision)lWhat long-term investments or projects should the business take on?lCapital structure(financing decision)lHow should we pay for our assets?lShould we use debt or equity?lWorking capital managementlHow do we manage the day-to-day finances of the firm?Long-term decisionsSh
9、ort-term decisionsForms of OrganizationlThree major forms in the united stateslSole proprietorshiplPartnershiplGenerallLimitedlCorporationlLimited liability company “Big four”Sole ProprietorshiplAdvantageslEasiest to startlLeast regulatedlSingle owner keeps all the profitslTaxed once as personal inc
10、omelDisadvantageslLimited to life of ownerlEquity capital limited to owners personal wealthlUnlimited liabilitylDifficult to sell ownership interestPartnershiplAdvantageslTwo or more ownerslMore capital availablelRelatively easy to startlIncome taxed once as personal incomelDisadvantageslUnlimited l
11、iabilitylGeneral partnershiplLimited partnershiplPartnership dissolves when one partner dies or wishes to selllDifficult to transfer ownershipCorporationlAdvantageslLimited liabilitylUnlimited lifelSeparation of ownership and managementlTransfer of ownership is easylEasier to raise capitallDisadvant
12、ageslSeparation of ownership and managementlDouble taxation(income taxed at the corporate rate and then dividends taxed at personal rate)Goal Of Financial ManagementlWhat should be the goal of a corporation?lMaximize profit?lMinimize costs?lMaximize market share?lMaximize the current value of the co
13、mpanys stock?lDoes this mean we should do anything and everything to maximize owner wealth?The Agency ProblemlAgency relationshiplPrincipal hires an agent to represent their interestlStockholders(principals)hire managers(agents)to run the companylAgency problemlConflict of interest between principal
14、 and agentlManagement goals lAgency cost:direct cost and indirect costManaging ManagerslManagerial compensationlIncentives can be used to align management and stockholder interestslThe incentives need to be structured carefully to make sure that they achieve their goallCorporate controllProxy fightl
15、The threat of a takeover may result in better management.caselOther stakeholdersCase of takeoverlCase 1:hostile takeoverlAcquiring firm:ShengdalTarget firm:Sinal2005.2,19.5%acquisition on Nasdaql2005.3,anti-takeover:poison pill(shares dilution plan)19.5%-2.28%lCome to a deadlocklCase 2:lAcquiring fi
16、rm:Group DanonelTarget firm:WahahalJoint contribution from 1996:Danone 51%;Wahaha 49%lBid a price:4 billion Rmbl2009 settle out of court:Danone 51%shares sold for 0.3 billion EurosFinancial MarketslCash flows to the firmlClassification:l1.Financing period:currency market;capital marketl2.Trading obj
17、ect:spot market;futures market;optionl3.The first issue of security:primary;secondary l marketslSecondary market:dealer vs.auction marketslAuction:physical place;centralized bidding;three priority example:NYSElDealer:no physical place;OTC trasactionl example:NASDAQFigure 1.2Quick QuizlWhat are the f
18、our basic areas of finance?lWhat are the three types of financial management decisions and what questions are they designed to answer?lWhat are the three major forms of business organization?lWhat is the goal of financial management?lWhat are agency problems and why do they exist within a corporation?
