393_lecture1

393_lecture1 - Introduction to Financial Economics Lecture...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Introduction to Financial Economics Lecture 1 Myung Joo Song ECON 393 Fall 2011 Myung Joo Song (ECON 393) Introduction to Financial Economics Fall 2011 1 / 25 An Overview in Macro Context Myung Joo Song (ECON 393) Introduction to Financial Economics Fall 2011 2 / 25 What is Corporate Finance? Corporate Firm and Finance: To run a firm, capital mobilization and management are crucial. It is natural to ask simple questions: Where and how does firm get money? In the management of the firm, how does firm manage its pool of cash? Though questions are simple, the answers are complicated. Formally, Corporate finance studies ways to answer 3 questions: 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) Myung Joo Song (ECON 393) Introduction to Financial Economics Fall 2011 3 / 25 A Sample Simplified Organizational Chart Myung Joo Song (ECON 393) Introduction to Financial Economics Fall 2011 4 / 25 Financial Manager The Chief Financial Officer (CFO) or Vice-President of Finance coordinates the activities of the treasurer and the controller. The Controller handles: 1 Cost 2 Financial Accounting 3 Taxes 4 Information Systems The Treasurer handles: 1 Cash and Credit Management 2 Financial Planning 3 Capital Expenditures Myung Joo Song (ECON 393) Introduction to Financial Economics Fall 2011 5 / 25 Importance of Financial Management Firm has values? How can a firm borrow? Can the firm owners sell the firm? Then How? Why could Lehman borrow $120 billion between 2006 and 2007? Good Reputation? Myung Joo Song (ECON 393) Introduction to Financial Economics Fall 2011 6 / 25 Financial Management Decisions Capital Budgeting Firms investments in fixed assets. Future cash flows from investment size, timing, riskiness. Capital Structure Mix of debt (borrowing) and equity (ownership interest) used by a firm. Answer questions: 1 What are the least expensive sources of funds? 2 Is there an optimal mix of debt and equity? 3 How and where should the firm raise funds? Working Capital Management Managing short-term assets and liabilities. Answer questions: 1 How much inventory should the firm carry? 2 What credit policy is best? 3 Where will we get our short-term loans? Myung Joo Song (ECON 393) Introduction to Financial Economics Fall 2011 7 / 25 Forms of Business Organization Focus: Ownership and Management....
View Full Document

{[ snackBarMessage ]}

Page1 / 25

393_lecture1 - Introduction to Financial Economics Lecture...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online