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Unformatted text preview: Chapter 1: Introduction to Corporate Finance ECO389, Spring 2010 1 What is Corporate Finance 1.1 What corporate finance is about This course is about the process of obtaining and employing debt and equity to invest in real assets (plant, property, machines, oce, etc.) to produce real goods and services. Corporate finance is defined broadly. Every decision that a business makes has financial implications, and any decision which affects the finances of a business is a corporate finance decision (Professor Damodaran). Corporate finance is everywhere. 1.2 What corporate finance isnt about 1. Personal Finance (savings/consumption/portfolio decisions) 2. Financial Products (Pensions, etc.) 3. The Financial Services Industry (HSBC, banks, etc.) 4. Predicting Financial Market movements over the next few years 5. Should I sell/buy my house? 1.3 Focus of Corporate Finance 1. Investment Decision (spending the money) 2. Financing Decision (raising the money) 3. Dividend Decision (returning the money) 1 2 Organizing a Business 2.1 Different Organizations 1. Sole Proprietorship Small ventures can be owned by a single individual. They are called sole pro- prietorships. 2. Partnership In other cases several people join the won and manager a partnership. Many professional businesses such as accounting and legal firms are partnerships....
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- Spring '08