BCOR 2200 Chapter 1

BCOR 2200 Chapter 1 - Chapter 1 Introduction 1 Chapter 1...

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Chapter 1 Introduction 1
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Chapter 1 Outline: A Quick Look Business Finance and The Financial Manager Forms of Business Organization The Goal of Financial Management The Agency Problem and Control of the Corporation Financial Markets and the Corporation 2
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1.1 A Quick Look Four Basic Areas of Finance 1.Corporate Finance A. Capital Budgeting – Do a proposed project? B. How do you pay for the project? (Three choices) C. Working Capital Management 2.Investments 3.Financial Institutions 4.International Finance Lets go over these in more detail
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Four Basic Areas of Finance 1.Corporate Finance A. Capital Budgeting – Do a proposed project? You have an idea. Will it make money? Will the idea “Increase the firm’s value” How many units can we sell? (Marketing) How much will it cost to make the units? (Operations) B. How do you pay for the project? (Three choices) 1. Sell a piece of the company Sell an Equity stake a.k.a. sell stock 2. Borrow the money Sell Debt securities a.k.a. sell bonds 3. Retain Earnings Keep past profits to finance expansion 4
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1. Corporate Finance (Continued) A. Working Capital Management Make Sure there is enough cash and inventory on hand. The BLUE ones are Working capital accounts Too Much Cash? Payoff ST Debt (Lower Interest Expense) Not Enough cash? Borrow More (Increase Interest Expense) Assets Cash ST Debt Inventory A/P A/R LT Debt PPE Equity 5
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Firms sell securities (stocks and bonds) Someone buys them Which ones should you buy? What are the worth? This is called Securities Analysis If I hold a bunch of different securities called a portfolio ), how do the different securities combine into portfolios? This is called portfolio analysis
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BCOR 2200 Chapter 1 - Chapter 1 Introduction 1 Chapter 1...

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