Professional Documents
Culture Documents
4.
5.
6.
7.
1-2
The Role of
Financial Management
1-3
Corporate Governance
What is Financial
Management?
Concerns the acquisition,
financing, and
management of assets
with some overall goal in
mind.
1-4
Investment Decisions
Most important of the three
decisions.
1-5
Financing Decisions
1-6
Asset Management
Decisions
How
Financial
Greater
1-7
Maximization of
Shareholder Wealth!
Value creation occurs when
we maximize the share price
for current shareholders.
1-8
Shortcomings of
Alternative Perspectives
Profit Maximization
Maximizing
Problems
1-9
Shortcomings of
Alternative Perspectives
Earnings per Share Maximization
Maximizing
Problems
Ignores
1-10
Strengths of Shareholder
Wealth Maximization
Takes
Thus,
1-11
Cadbury
Credit
Dow
long-term, sustainable
shareholder value
ExxonMobil:
Modern Corporation
Shareholders
Management
Role of Management
Management acts as an agent
for the owners (shareholders)
of the firm.
1-14
An agent is an individual
authorized by another person,
called the principal, to act in
the latters behalf.
Agency Theory
Jensen
Agency
Theory is a branch of
economics relating to the
behavior of principals and their
agents.
1-15
Agency Theory
Principals
Incentives
1-16
Social Responsibility
Wealth
Assume
Then
1-17
Corporate Governance
Corporate
shareholders, board of
directors, and senior management.
Then
1-18
Board of Directors
Typical
Set
responsibilities:
company-wide policy;
Advise
Hire,
Review
Oversee
1-19
laws
Established
Generally
1-20
1-21
VP of
Finance
Vice President
Marketing
VP of Finance
1-22
Treasurer
Controller
Capital Budgeting
Cash Management
Credit Management
Dividend Disbursement
Fin Analysis/Planning
Pension Management
Insurance/Risk Mngmt
Tax Analysis/Planning
Cost Accounting
Cost Management
Data Processing
General Ledger
Government Reporting
Internal Control
Preparing Fin Stmts
Preparing Budgets
Preparing Forecasts
throughout the
Chapters
A
Useful
Financial Tool
Does
NOT replace
financial
understanding
1-23
1-24
2nd
Format
ENTER
2nd
QUIT
Change Periods
per Year Setting
Change the periods per
year from 12 to 1
Press:
1-25
2nd
P/Y
ENTER
2nd
QUIT