2-1b.- Finance Fundamentals II

2-1b.- Finance Fundamentals II - Ramesh Rao 1 Financial...

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Unformatted text preview: Ramesh Rao 1 Financial Management Fundamentals Ramesh Rao 2 A. What is a Firm? A1. The Firm as a Nexus of Contracts A2. Organizational Forms as Alternative Property Rights Configurations A3. The Might of the Corporation and related issues B. Markets with Traded Assets B1. Financial Markets B2. Kinds of Markets B3. Debt Vs. Equity C. Whose Interest Should the Corporation Serve? D. How does the corporation make money? D1. Profits D2. Cash Flow D3. Profits vs. Cash flows D4. Financial Management Decisions E. Operating Internationally Chapter Organization Ramesh Rao 3 A. What is a Firm? Why do Firms Exist? Primitive Society v. Modern Man Cooperative agreements replaced by signed contracts Markets v. Firms Cost efficiency in dealings with a firm compared to an individual seller Boundaries of the Firm (Coase) What a firm does and does not do? Ramesh Rao 4 A1. The Firm as a Nexus of Contracts What is a contract? Expectation of deliverables (actions) Repercussions of default (penalties) Contracts may be Explicit Implicit Venues for contracts execution Firm Markets Ramesh Rao 5 A2. Alternative Property Rights Configurations Property Rights and Organizational Forms Proprietorship Partnership Corporations Others Ramesh Rao 6 Comparison of Organizational Forms Ownership Control Liability Life Access To Capital Prop One person One person Unlimited Owners Poor Part Several Partners Shared among partners Unlimited Any partners Better Corp Share- holders Entruste d to manager s Limited to investmen t Unlimite d Best Other differences: Voting rights, liquidity/marketability, taxation, reinvestment and dividend payout Ramesh Rao 7 A3. The Might of the Corporation and Related Issues Business Size Com parison by Num ber 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Number of Firms Corp Part Prop Ramesh Rao 8 Business Size Comparison by Revenue 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 Receipts (Bil$) Corp Part Prop Ramesh Rao 9 Countries Yr 2000 GNP ($ Billion) Cumulative GNP ($Billion) USA 10,533.00 10,533.00 Japan 4,852.00 4,852.00 Germany 2,242.00 7,094.00 Britain 1,544.00 8,638.00 France 1,543.00 10,181.00 China 1,329.00 11,510.00 Italy 1,260.00 12,770.00 Canada 760.00 13,530.00 Brazil 715.00 Spain 651.00 Mexico 580.00 S. Korea 515.00 India 510.00 Australia 444.00 Netherlands 429.00 Ramesh Rao 10 COMPANY Year 2000 Sales ($ Billion) Cummulative Sales ($ Billion) Exxon Mobil 210.392 210.392 Walmart Stores 192.295 402.687 General Motors 184.320 587.007 Ford Motors 180.598 767.605767....
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This note was uploaded on 01/15/2010 for the course FIN 357 taught by Professor Hadaway during the Fall '06 term at University of Texas at Austin.

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2-1b.- Finance Fundamentals II - Ramesh Rao 1 Financial...

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