BF Notes - January 23, 2008 I. Role of financial Management...

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January 23, 2008 I. Role of financial Management A. Decision making 1. Fixed asset management 2. Efficient utilization of current assets 3. Capital structure 4. Dividend policy B. Emphasis – rush return relationship Stock market: higher risk, but higher potential $ Banks: lower risk – to none at all, small $ potential C. Responsibility of Financial Management 1. Financing an efficient …. . and ……. . of assets. 2. Often financing through the more appropriate venues. D. Daily 1. Credit management 2. Implementing 3. Cash receipts/Cash Dispersements E. Less Routine 1. Sale of ……. . and …… 2. Capital budgeting 3. ….. II. Forms of Organizations A. Sole proprietorship a. Single owner b. Simple to form c. Inexpensive
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d. Unlimited liability e. Earnings are taxed at the individual level B. Partnership a. Two or more owners b. Articles of partners by agreement c. Unlimited liability d. Income is taxed at the partner level C. Corporation 1. Separately owned entity – created by state 2. Formed by articles of incardination 3. Limited liability 4. Advantages a. Easily divide ownership b. Continuity of life 5. Disadvantages – double taxation 6. Board of Directors Managing the company Stockholders ↓ Elect Board of Directors ↓ Appoint Management III. Corporate A. Managers hired to act as agents for owners B. Relationship and …. . of oversights by the Board of Directors C. Agency theory – large institutions have …. Pressure on management to be more responsive to shareholders.
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D. Sarbanes-Oxley Act Securities and Exchange Commission 1. Imposed greater accountability on executives 2. Created additional compliance requirements 3. Purpose was to control corrupt corporate balance IV. Goal of Financial Management A. Wealth management 1. Long term goal 2. Influenced by changing investor expectations 3. Highest possible long-term value for the firm B. Maximizing Profits 1. Short-term 2. Timing of benefits January 28, 2008 2 Questions In a corporation what group has the ultimate responsibility of managing the stockholders interest? The Stockholders elect the board of directors who then appoint the management. The Board of Directors is put up by management. Wealth maximization gets the highest possible price for market shares. Stockholders ↓ Elect Board of Directors ↓ Appoint Management V. Role of Financial Market
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1. Money market → short term < 1yr. 2. Capital markets → long term > 1 yr. B. Allocation of Capital 1. Primary Market – initial issue of securities 2. Secondary Market – where previously issued securities are bought and sold by investors. C. Institutional Investors Pension plans, insurance companies, and banks. Force restructuring – results in change to:
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This note was uploaded on 04/29/2008 for the course FINA 10100 taught by Professor Markert during the Spring '08 term at Ithaca College.

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BF Notes - January 23, 2008 I. Role of financial Management...

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