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2504c_0913 - BUSI 2504c Essentials of Business Finance...

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BUSI 2504c - Essentials of Business Finance Monday, September 13, 2010 §1 Introduction to Financial Management §5 Time Value of Money
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course information Title: BUSI 2504c - Essentials of Business Finance Instructor: Mitch Murphy Office Hours: to be decided , 2010 DT Email: [email protected] Website: http://lemma.ca/2504c/ Textbook: Ross, Westerfield, Jordan and Roberts (2010) Fundamentals of Corporate Finance (7th Canadian Ed.) McGraw-Hill Ryerson Grading: in-class quizzes (best 4 of 5) [email protected]% 20% midterm exam 25-30% final exam 50-55% BUSI 2504c Monday, September 13, 2010 2 / 36
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chapter 1: introduction to corporate finance §1.1 - corporate finance §1.2 - forms of business organization §1.3 - goals of financial management §1.4 - agency problem §1.5 - financial markets §1.6 - financial institutions BUSI 2504c Monday, September 13, 2010 3 / 36
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1.1 introduction: corporate finance Some important questions that are answered using finance: What long-term investments should the firm take on? Where will we get the long-term financing to pay for the investment? How will we manage the everyday financial activities of the firm? BUSI 2504c Monday, September 13, 2010 4 / 36
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1.1 introduction: financial manager Financial managers try to answer some or all of these questions The top financial manager within a firm is usually the Chief Financial Officer (CFO) Treasurer - oversees cash management, capital expenditures and financial planning Controller - oversees taxes, cost accounting, financial accounting and data processing BUSI 2504c Monday, September 13, 2010 5 / 36
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1.1 introduction: finance org chart (figure 1.1, page 4) Board of Directors Chairman of the Board and Chief Executive Officer (CEO) President and Chief Operating Officer (COO) Vice President Production Treasurer Controller Cash Manager Credit Manager Tax Manager Cost Accounting Manager Capital Expenditures Financial Planning Financial Accounting Manager Data Processing Manager Vice President Finance (CFO) Vice President Marketing Shareholders BUSI 2504c Monday, September 13, 2010 6 / 36
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1.2 forms of business organization: sole proprietorship Advantages: Easiest to start Least regulated Single owner keeps all the profits Taxed once as personal income Disadvantages: Unlimited liability Limited to life of owner Equity capital limited to owner’s personal wealth Difficult to sell ownership interest BUSI 2504c Monday, September 13, 2010 7 / 36
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1.2 forms of business organization: partnership Advantages: Two or more owners More capital available Relatively easy to start Income taxed once as personal income Disadvantages: Unlimited liability General partnership Limited partnership Partnership dissolves when one partner dies or wishes to sell Difficult to transfer ownership BUSI 2504c Monday, September 13, 2010 8 / 36
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1.2 forms of business organization: corporation Advantages: Limited liability Unlimited life Separation of ownership and management Transfer of ownership is easy Easier to raise capital Disadvantages: Separation of ownership and management
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