chapter01 - Contemporary Financial Management Chapter 1 The Role and Objective of Financial Management 2004 by Nelson a division of Thomson Canada

chapter01 - Contemporary Financial Management Chapter 1 The...

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© 2004 by Nelson, a division of Thomson Canada LimitedChapter 1:The Role and Objective ofFinancial ManagementContemporary Financial Management
© 2004 by Nelson, a division of Thomson Canada Limited2IntroductionThis chapter introduces the financial management process. It looks at the financial manager, the field of finance, financial decisions and their implications, and the daily questions faced by the firm’s financial management.
© 2004 by Nelson, a division of Thomson Canada Limited3Questions Faced in FinanceHow is finance related to other fields of study?What are financial managers’ goals and objectives?How has the finance field evolved?How is the finance field changing today?
© 2004 by Nelson, a division of Thomson Canada Limited4Forms of Business OrganizationsSole proprietorshipPartnershipCorporation
© 2004 by Nelson, a division of Thomson Canada Limited5Sole ProprietorshipOwned by one personRepresent 75% of all businesses, but accounts for less than 5% of dollar volume.AdvantagesDisadvantagesEasy FormationUnlimited LiabilityDifficult to Raise Funds
© 2004 by Nelson, a division of Thomson Canada Limited6Small BusinessNot the dominant firm in the industryTend to grow more rapidlyLack management resourcesHave a high failure rateShares not publicly tradedPoorly diversifiedOwner/manager frequently the same
© 2004 by Nelson, a division of Thomson Canada Limited7PartnershipOwned by two or more personsClassified as general or limitedAdvantagesDisadvantagesEasy FormationDifficult to Raise FundsPartnership Dissolves if Partner DiesTaxation occurs at the level of the partner, not the partnership
© 2004 by Nelson, a division of Thomson Canada Limited8Liability of PartnersGeneral PartnerHas unlimited liability for all obligations of the businessLimited PartnerLiability limited to the partnership agreement
© 2004 by Nelson, a division of Thomson Canada Limited9Limited PartnershipsMust have at least one general partner who:Has unlimited liabilityPerforms all management functionsCan have many limited partners who:Have limited liabilityCannot participate in management
© 2004 by Nelson, a division of Thomson Canada Limited10

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