chapter1 - Chapter One Introduction MGMT 109 Managerial...

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MGMT109 1 Chapter One Introduction MGMT 109 Managerial Finance Professor Lu Zheng Cash Flows between the Firm and the Financial Markets Total Value of Firm’s Assets Total Value of the Firm to Investors in the Financial Markets B. Firm invests in assets Current Assets Fixed Assets C. Cash flow from firm’s assets D. Government E. Retained cash flows A. Firm issues securities F. Dividends and debt payments Financial Markets Short-term debt Long-term debt Equity shares What is Corporate Finance? Corporate finance studies two major decisions that a firm faces: • Investment decision (capital budgeting) – what projects to invest in and how much to invest? • Financing decision (capital structure) - how to raise the funds needed for the investment? This course deals with both questions.
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MGMT109 2 The Goal of Financial Management What are firm decision-makers hired to do? General Motors is not in the business of making automobiles. General Motors is in the business of making money .” Alfred P. Sloan Possible goals Three equivalent goals of financial manager and the corporation for whom she works is: • Maximize the current value of shareholders' wealth • Maximize share price • Maximize firm value Forms of Business Organization Sole Proprietorship
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chapter1 - Chapter One Introduction MGMT 109 Managerial...

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