Chapter 1 - Introduction to Corporate Finance What is...

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Introduction to Corporate Finance
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What is Corporate Finance? What long-term investments should the business take on? e.g., buildings, machinery etc – Capital Budgeting Where will we get the long-term financing to pay for the investment? bring in other owners or borrow the money - Capital Structure How much short-term cash flow does a company need to pay its bills? collecting from customers and paying to suppliers - The Net Working Capital
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The Financial Manager Financial managers try to answer some or all of these questions Financial management function is associated with a top officer of the firm e.g. vice president of finance or CFO Treasurer oversees cash management, credit management, capital expenditures and financial planning activities related to 3 Qs raised earlier Controller oversees taxes, cost accounting, financial accounting and data processing
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The Investment Decision Capital budgeting is the planning and control of cash outflows in the expectation of deriving future cash inflows from investments in non-current assets Financial manager tries to identify investment opportunities that are worth more to the firm than they cost to acquire Involves evaluating the: size of future cash flows timing of future cash flows risk of future cash flows
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Capital Structure A firm’s capital structure is the specific mix of debt and equity used to finance the firm’s long-term investments Decisions need to be made on both the financing mix and how and where to raise the money How much should the firm borrow?
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This note was uploaded on 04/13/2010 for the course BUSINESS engl 102 taught by Professor Seyhanözmenek during the Spring '10 term at Middle East Technical University.

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Chapter 1 - Introduction to Corporate Finance What is...

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