1.25 ch. 1 Finance 301

1.25 ch. 1 Finance 301 - the transfer ownership Financial...

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Finance 301 1/25 Corporate Finance Corporation - legal entity which allows managers to conduct business on behalf of its owners (Separation of ownership and Management) - owners elect the Board of Directors, which hires senior managers - initial owners get a charter from the government - corporations are like people in the eyes of the law as they must pay taxes, can be sued, etc. - Corporation continues to exist even if owners sell their portion of a company, which can be done relatively easily. Business Organization - Corporation is the most complex type of business organization - Simpler forms include: o sole proprietorship (Single Owner) o Partnership (Group Owners) o Limited Liability Partnership (1 Full Partner and Multiple Limited Partners) - Only Corporations have completely limited liability for all owners - Incorporating makes it easier for the firm to raise funds (debt and equity) and simplifies
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Unformatted text preview: the transfer ownership Financial Management 1. Investing decision (Capital Budget) What project should we invest in? What stocks or bonds should we buy? How much is a company or security worth? 2. Financial decision Where do we get money for investing? From the owners of the Company (equity)? Goals and Governance-Goal of on ethical manager o Maximize shareholder value (not the same as maximizing profits or market share)-Sometimes managers make decisions which benefit then personally at cost of the shareholders. These are known as agency cost. o This includes both the cost of managers pursuing their own interests and the cost owners pay to monitor them.-Good corporations find ways to make the managers goals match the owners goals...
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1.25 ch. 1 Finance 301 - the transfer ownership Financial...

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