CHAPTER1 An Overview of Financial Management (《财务管理基础》PPT课件)
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Some actions may cause an increase in earnings, yet cause the stock price to decrease (and vice versa).
1-11
AGENCY RELATIONSHIPS
An agency relationship exists whenever a principal hires an agent to act on their behalf.
Is stock price maximization good or bad for society?
Should firms behave ethically?
1-10
IS STOCK PRICE MAXIMIZATION THE SAME AS PROFIT MAXIMIZATION?
Forecasting and planning Investment and financing decisions Coordination and control Transactions in the financial markets Managing risk
1-3
ROLE OF FINANCE IN A TYPICAL BUSINESS ORGANIZATION
1-8
CORPORATION
Advantages
Unlimited life Easy transfer of ownership Limited liability Ease of raising capital
Disadvantages
Double taxation Cost of set-up and report filing
1-13
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.
The external environment
1-17
Tax Department
1-4
FINANCIAL MANAGEMENT ISSUES OF THE NEW MILLENNIUM
The effect of changing technology
The globalization of business
1-5
PERCENTAGE OF REVENUE AND NET INCOME FROM OVERSEAS OPERATIONS FOR 10 WELLKNOWN CORPORATIONS, 2001
FACTORS THAT AFFECT THE LEVEL AND RISKINESS OF CASH FLOWS
Decisions made by financial managers:
Investment decisions Financing decisions (the reห้องสมุดไป่ตู้ative use of debt financing) Dividend policy decisions
CHAPTER 1 AN OVERVIEW OF FINANCIAL MANAGEMENT
Career Opportunities Issues of the New Millennium Forms of Businesses Goals of the Corporation Agency Relationships
Throughout the course, we discuss how to estimate the inputs and how financial management is used to improve them and thus maximize a firm’s value.
1-16
Board of Directors
President
VP: Sales
VP: Finance
VP: Operations
Treasurer
Controller
Credit Manager
Cost Accounting
Inventory Manager
Financial Accounting
Capital Budgeting Director
But the following factors affect managerial behavior:
Managerial compensation plans Direct intervention by shareholders The threat of firing The threat of takeover
No, despite a generally high correlation amongst stock price, EPS, and cash flow.
Current stock price relies upon current earnings, as well as future earnings and cash flow.
1-1
CAREER OPPORTUNITIES IN FINANCE
Money and capital markets Investments Financial management
1-2
RESPONSIBILITY OF THE FINANCIAL STAFF
Maximize stock value by:
Company
Coca-Cola Exxon Mobil General Electric General Motors IBM JP Morgan Chase & Co. McDonald’s Merck 3M Sears, Roebuck
% of Revenue from overseas
60.8 69.4 32.6 26.1 57.9 35.5 63.1 18.3 52.9 10.5
Value
CF1 (1 k)1
CF2 (1 k)2
CFn (1 k)n
n t 1
CFt (1 k)t
.
To estimate an asset’s value, one estimates the cash flow for each period t (CFt), the life of the asset (n), and the appropriate discount rate (k)
1-7
SOLE PROPRIETORSHIPS & PARTNERSHIPS
Advantages
Ease of formation Subject to few regulations No corporate income taxes
Disadvantages
Difficult to raise capital Unlimited liability Limited life
1-9
FINANCIAL GOALS OF THE CORPORATION
The primary financial goal is shareholder wealth maximization, which translates to maximizing stock price.
Do firms have any responsibilities to society at large?
% of Net Income from overseas 35.9 60.2 25.2 60.6 48.4 51.7 61.7 58.1 47.0 7.8 1-6
ALTERNATIVE FORMS OF BUSINESS ORGANIZATION Sole proprietorship Partnership Corporation
1-14
FACTORS THAT AFFECT STOCK PRICE
Projected cash flows to shareholders
Timing of the cash flow stream
Riskiness of the cash flows
1-15
BASIC VALUATION MODEL
Within a corporation, agency relationships exist between:
Shareholders and managers Shareholders and creditors
1-12
SHAREHOLDERS VERSUS MANAGERS
Managers are naturally inclined to act in their own best interests.
1-11
AGENCY RELATIONSHIPS
An agency relationship exists whenever a principal hires an agent to act on their behalf.
Is stock price maximization good or bad for society?
Should firms behave ethically?
1-10
IS STOCK PRICE MAXIMIZATION THE SAME AS PROFIT MAXIMIZATION?
Forecasting and planning Investment and financing decisions Coordination and control Transactions in the financial markets Managing risk
1-3
ROLE OF FINANCE IN A TYPICAL BUSINESS ORGANIZATION
1-8
CORPORATION
Advantages
Unlimited life Easy transfer of ownership Limited liability Ease of raising capital
Disadvantages
Double taxation Cost of set-up and report filing
1-13
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.
The external environment
1-17
Tax Department
1-4
FINANCIAL MANAGEMENT ISSUES OF THE NEW MILLENNIUM
The effect of changing technology
The globalization of business
1-5
PERCENTAGE OF REVENUE AND NET INCOME FROM OVERSEAS OPERATIONS FOR 10 WELLKNOWN CORPORATIONS, 2001
FACTORS THAT AFFECT THE LEVEL AND RISKINESS OF CASH FLOWS
Decisions made by financial managers:
Investment decisions Financing decisions (the reห้องสมุดไป่ตู้ative use of debt financing) Dividend policy decisions
CHAPTER 1 AN OVERVIEW OF FINANCIAL MANAGEMENT
Career Opportunities Issues of the New Millennium Forms of Businesses Goals of the Corporation Agency Relationships
Throughout the course, we discuss how to estimate the inputs and how financial management is used to improve them and thus maximize a firm’s value.
1-16
Board of Directors
President
VP: Sales
VP: Finance
VP: Operations
Treasurer
Controller
Credit Manager
Cost Accounting
Inventory Manager
Financial Accounting
Capital Budgeting Director
But the following factors affect managerial behavior:
Managerial compensation plans Direct intervention by shareholders The threat of firing The threat of takeover
No, despite a generally high correlation amongst stock price, EPS, and cash flow.
Current stock price relies upon current earnings, as well as future earnings and cash flow.
1-1
CAREER OPPORTUNITIES IN FINANCE
Money and capital markets Investments Financial management
1-2
RESPONSIBILITY OF THE FINANCIAL STAFF
Maximize stock value by:
Company
Coca-Cola Exxon Mobil General Electric General Motors IBM JP Morgan Chase & Co. McDonald’s Merck 3M Sears, Roebuck
% of Revenue from overseas
60.8 69.4 32.6 26.1 57.9 35.5 63.1 18.3 52.9 10.5
Value
CF1 (1 k)1
CF2 (1 k)2
CFn (1 k)n
n t 1
CFt (1 k)t
.
To estimate an asset’s value, one estimates the cash flow for each period t (CFt), the life of the asset (n), and the appropriate discount rate (k)
1-7
SOLE PROPRIETORSHIPS & PARTNERSHIPS
Advantages
Ease of formation Subject to few regulations No corporate income taxes
Disadvantages
Difficult to raise capital Unlimited liability Limited life
1-9
FINANCIAL GOALS OF THE CORPORATION
The primary financial goal is shareholder wealth maximization, which translates to maximizing stock price.
Do firms have any responsibilities to society at large?
% of Net Income from overseas 35.9 60.2 25.2 60.6 48.4 51.7 61.7 58.1 47.0 7.8 1-6
ALTERNATIVE FORMS OF BUSINESS ORGANIZATION Sole proprietorship Partnership Corporation
1-14
FACTORS THAT AFFECT STOCK PRICE
Projected cash flows to shareholders
Timing of the cash flow stream
Riskiness of the cash flows
1-15
BASIC VALUATION MODEL
Within a corporation, agency relationships exist between:
Shareholders and managers Shareholders and creditors
1-12
SHAREHOLDERS VERSUS MANAGERS
Managers are naturally inclined to act in their own best interests.