20091013+class+notes

20091013+class+notes - Financial Management Barry Marchman,...

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Financial Management Barry Marchman, Ph.D. Georgia Institute of Technology Atlanta, GA 30332 Phone: 404-894-5110 Email: barry.marchman@mgt.gatech.edu
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Part 1: Issues in Financial Management
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Issues In Financial Management A. Decision Making B. Forms of Business C. Goals of Financial Management D. Agency Problem E. Financial Markets F. Ethics 3
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Issues In Financial Management A. Decisions Personal Finance What do I do with my money? Fool School Baby Steps Debt Credit – why is this important? 4
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Issues In Financial Management A. Decisions Fool School 1. Compound Interest (see ‘two brothers’) 2. Get Foolish 3. Every dollar is an investment 4. Open and fund your accounts 5
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Issues In Financial Management A. Decisions Types of accounts 401k 403b IRA Roth 6
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Issues In Financial Management A. Decisions Roth Vs. Traditional 7 Contribution GROWTH Contribution GROWTH http://www.irs.gov/retirement/participant/article/0,,id=202518,00.html
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Issues In Financial Management A. Decisions Dave Ramsey’s Baby Steps Debt Snowball Daveramsey.com 8
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Issues In Financial Management A. Decisions Dave Ramsey’s Debt Snowball 1. 10% 300 2. 18% 1,000 3. 8% 5,000 4. 5% 25,000 Mathematically – requires discipline Psychologically – assumes you lack discipline 9
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Issues In Financial Management A. Decisions Different Philosophy MF: DR: 10
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Issues In Financial Management A. Decisions What should I do before I invest? 11
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Issues In Financial Management A. Decisions Corporate Finance What do I do with my money? Capital Budgeting Debt Capital Structure Credit – why is this important? Working Capital Management 12
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Issues In Financial Management B. Forms Sole Proprietor Partnership Corporation We focus on the corporation in this class Taxes Liabilities When does the corporate veil fail? 13
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Issues In Financial Management C. Goals What are some good goals for the corporation? What is the overall goal? Why? 14
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Issues in Financial Management D. The Agency Problem Agent – one who acts on the behalf of another Real Estate Entertainment Sports Medical Legal Mechanic 15
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Agency relationship Principal hires an agent to represent his/her interests Stockholders (principals) hire managers (agents) to run the company Agency problem Conflict of interest between principal and agent Management goals and agency costs Issues in Financial Management D. The Agency Problem 16
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Managerial compensation Incentives can be used to align management and stockholder interests The incentives need to be structured carefully to make sure that they achieve their goal Golden handcuff Corporate control The threat of a takeover may result in better management (MOVIE: Barbarians at the Gate) Other stakeholders Debt Issues in Financial Management D. The Agency Problem 17
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20091013+class+notes - Financial Management Barry Marchman,...

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