BDH+ed+3+Chapter+1+-+Questrom+-+Fall+16+update

BDH+ed+3+Chapter+1+-+Questrom+-+Fall+16+update - FE101...

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FE101: Chapter 1 Corporate Finance and the Financial Manager
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Chapter Outline Introduction (Class 1) 1.1 Why Study Finance? 1.3 The Financial Manager 1.6 Financial Institutions Corporations and Financial Markets (Class 10) 1.2 The Four Types of Firms 1.4 The Financial Manager’s Place in the Corporation 1.5 The Stock Market 2
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CLASS 1: INTRODUCTION Why study Finance? What does a Financial Manager do? 3
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Why Study Finance? Individuals are taking charge of their personal finances with decisions such as: When to start saving and how much to save for retirement Whether a car loan or lease is more advantageous Whether a particular stock is a good investment How to evaluate the terms of a home mortgage 4
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Why Study Finance? In your business career, you may face such questions such as: Should your firm launch a new product? Which supplier should your firm choose? Should your firm produce a part or outsource production? Should your firm issue new stock or borrow money instead? How can you raise money for your start-up firm? 5
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Why Study Finance? Financial Management The financial manager plays a critical role inside any business enterprise. Potential decisions include: What products to launch How to pay to develop those products What profits to keep and how to return profits to investors The financial manager does all of this with the goal of maximizing the value of the firm. 6
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The Financial Manager The financial manager has three main tasks: Make investment decisions Make financing decisions Manage cash flow from operating activities 7
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The Financial Manager Making Investment Decisions The financial manager must weigh the costs and benefits of each investment or project They must decide which investments or projects qualify as good uses of the stockholders’ money 8
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The Financial Manager Making Financing Decisions The financial manager must decide whether to raise more money from new and existing owners by selling more shares of stock or to borrow the money instead 9
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The Financial Manager Managing Short-Term Cash Needs The financial manager must ensure that the firm has enough cash on hand to meet its obligations at each point in time This job is also known as managing working capital 10
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