Chap_1_(Intro_to_Financial_Mgmt)

Chap_1_(Intro_to_Financial_Mgmt) - Principles of Finance...

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Principles of Finance Professor Junqiang Xie
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Textbook Title: Financial Management Authors: Keown, Martin, Petty and Scott Publisher:Prentice Hall Edition: 10th
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Objective 1: What is Finance Finance is the study of the creation and maintenance of economic value or wealth
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Objective 2: Goal of the Firm Profit Maximization ? Ignores risk of project returns Ignores timing of project returns Ignores the cost of funds from shareholders Maximization of Shareholder Wealth Wealth is measured by the market value of the existing shareholders common stock !? Over the long run, price equals value !?
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Objective 3: Legal Forms of Business Organization (1) Sole Proprietorship Single individual maintains title to the assets Personally liable without limitation Partnership General Partnership All partners are jointly liable without limitation Relationship among partners dictated by the partnership agreement
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Legal Forms of Business Organization (2) Partnership Limited Partnership Three conditions Must be at least one general partner who retains unlimited liability Names of limited partners may not appear in the name of the firm Limited partners may not participate in management Limited partners are strictly investors Limited Liability Company (LLC) Cross between a partnership and a corporation
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Chap_1_(Intro_to_Financial_Mgmt) - Principles of Finance...

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