Transcript T1.1 Chapter Outline

saklviTüal½yCatiRKb;RKg
National University of Management
mUldæanRKwHénhirBaØvtß
úsaCIvkmµ
FUNDAMENTALS OF CORPORATE FINANCE
MBA PROGRAM
2011 - 2012
Lecturer : Chey Vong
Table of Contents
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Corporate Finance
Introduction to Corporate Finance
Financial Statements, Taxes, and Cash Flow
Working with Financial Statements
Introduction to Valuation: The Time Value of Money
Discounted Cash Flow Valuation
Interest Rates and Bond Valuation
Stock Valuation
Net Present Value and Other Investment Criteria
Return, Risk, and the Security Market Line
Cost of Capital
1
Chapter 1
Introduction to
Corporate Finance
Chapter Organization

Corporate Finance and the Financial Manager

Forms of Business Organization

The Goal of Financial Management

The Agency Problem and Control of the Corporation

Financial Markets and the Corporation

Summary and Conclusions
Corporate Finance
2
The Four Basic Areas of Finance
 Corporate
Finance
 Investments
 Financial
Institutions
 International
Corporate Finance
Finance
3
What Is Corporate Finance ?
Imagine that you were to start your own business .
No matter what type you started , you would have to
answer the following three questions :
1- What long-term investments should you take on ? That is
, what lines of business will you be in and what sorts of
buildings , machinery , and equipment will you need ?
2- Where will you get the long-term financing to pay for
your investment ? Will you bring in other owners or will
you borrow the money ?
3- How will you manage your everyday financial activities
such as collecting from customers and paying suppliers ?
Corporate Finance
4
A Simplified
Organizational
Chart
Board of Directors
Chairman of the Board and
Chief Executive Officer (CEO)
President and Chief
Operations Officer (COO)
Vice President
Marketing
Vice President
Finance (CFO)
Treasurer
Corporate Finance
Vice President
Production
Controller
Cash Manager
Credit Manager
Tax Manager
Cost Accounting
Manager
Capital
Expenditures
Financial
Planning
Financial
Accounting
Manager
Data
Processing
Manager
5
Forms of
Business
Organization
Business
Proprietorship
Corporate Finance
Partnership
Corporation
6
The Goal of Financial Management
If we were to consider possible financial goals ,
we might find some ideas like the following :
 Survive
 Avoid financial distress and bankruptcy
 Beat the competition
 Maximize sales or market share
 Minimize costs
 Maximize profits
 Maintain steady earnings growth
Corporate Finance
7
Agency Relationship
The relationship between
stockholders and
management is called an
agency relationship . Such a
relationship exists whenever
someone (the principal) hires
another (the agent) to
represent his/her interests .
Corporate Finance
8
Financial Markets

What is the role of financial markets in
corporate finance?
Cash flows to and from the firm
Money markets and capital markets
Primary vs. secondary markets

Corporate Finance
How do financial markets benefit
society?
9
Cash Flows Between the Firm and the Financial Markets
Total Value of the Firm
to Investors in
the Financial Markets
Total Value of
Firm’s Assets
B.
Firm invests
B.inFirm
invests
assets
In assets
Currentassets
Assets
Current
Fixed Assets
Fixed
assets
A. Firm issues securities
E. Retained cash flows
F. Dividends and
debt payments
C. Cash flow from
firm’s assets
Financial
Financial
Markets
Markets
Short-term debtdebt
Short-term
Long-term debt
Long-term
Equity shares debt
Equity shares
D. Government
Corporate Finance
10
Quick Quiz
1. Who performs the financial management
function in the typical corporation?
2. What are the major advantages
and disadvantages of the corporate
form of organization?
3. Why is shareholder wealth
maximization a more appropriate
goal than profit maximization?
Corporate Finance
11