ch01_fof6

ch01_fof6 - Foundations of Finance Arthur Keown John D....

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Foundations of Finance Arthur Keown John D. Martin J. William Petty
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An Introduction to the Foundations of Financial Management – The Ties that Bind Chapter 1
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  Keown, Martin, Petty - Chapter 1 3 Learning Objectives 1. Identify the goal of the firm. 2. Compare the various legal forms of business organization and  explain why the corporate form of business is the most logical  choice for a firm that is large or growing. 3. Describe the corporate tax features that affect business decisions.  4. Describe the corporate tax features that affect decisions. 5. Explain the 10 principles that form the foundations of financial  management. 6. Explain what has led to the era of the multinational corporation.
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  Keown, Martin, Petty - Chapter 1 4 Slide Contents 1. The Goal of the Firm 2. Legal Forms of Business Organization 3. Role of Financial Manager in a  Corporation 4. Income Taxation 5. Ten Principles of Finance 6. Finance and Multinational Firm
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1. The Goal of the Firm
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  Keown, Martin, Petty - Chapter 1 6 The Goal of the Firm The goal of the firm is to  maximize  shareholder wealth .   Shareholder wealth is measured by share  prices. Thus shareholder wealth maximization  would imply maximizing the price of common  stock. 
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  Keown, Martin, Petty - Chapter 1 7 Part of Coca-Cola’s Vision Maximizing return to shareowners while  being mindful of our overall  responsibilities.” — http://www.thecoca-colacompany.com/ourcompany/mission_vision_values.html (retrieved March 13, 2007)
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  Keown, Martin, Petty - Chapter 1 8 Benefits of Maximizing  Shareholder  Wealth Good corporate decisions are those that  create wealth for the shareholder. Society benefits as scarce resources are  directed to the most profitable use by  businesses competing to create wealth.    
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  Keown, Martin, Petty - Chapter 1 9 Share Price Changes (during last  two years as of June 29, 2007) Google : Share price increased by nearly $200  or around 67% (from around $300 to $500) …  wealth created . Yahoo : Share price decreased by nearly $8  or around 23% (from around $35 to $27) …  wealth destroyed .
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Keown, Martin, Petty - Chapter 1 10 Why is Profit Maximization not the  appropriate goal? Profit maximization goal is unclear about the  time frame  over which profits are to be  measured. It is easy to manipulate the profits  through  various accounting policies. Profit maximization goal ignores risk and timing
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ch01_fof6 - Foundations of Finance Arthur Keown John D....

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