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Chap001 - Chapter 1 Introduction to Corporate Finance Key...

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Chapter 1 Introduction to Corporate Finance
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Key Concepts and Skills Know the basic types of financial management decisions and the role of the financial manager Know the goal of financial management Understand the conflicts of interest that can arise between owners and managers Understand the various types of financial markets 1-2
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What is finance? Finance is the study of how we allocate our assets over time in a risky world. For an individual, it is the study of how we pay our bills today and invest for the future The overall goal is maximizing our net worth, subject to the lifestyle we want to lead For a corporation, it is the study of how they pay their bills and how they choose to invest in future projects The overall goal is maximizing the stock price of the company
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Corporate Finance Some important questions that are answered using corporate finance What long-term investments should the firm take on? ( Capital budgeting ) Where will we get the long-term financing to pay for the investment? ( Capital structure ) How will we manage the everyday financial activities of the firm? ( Working capital management )
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What long-term investments should the firm take on? Examples. For a hotel chain, the decision to build a new property or buy a property from another chain.
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