Principles of Finance Fall 2012 (FIN 3403) Instructor: Nina
Schmidt, Ph.D. OUTLINE: Welcome & Introduction Syllabus,
Blackboard and Connect Chapter 1 0 Slide 2 1 Slide 3 Introduction
to Corporate Finance Chapter 1 Copyright 2013 by The McGraw-Hill
Companies, Inc. All rights reserved. McGraw-Hill/Irwin Slide 4
Chapter Outline Financial Management The Agency Problem Forms of
Business Organization Financial Markets Class Overview 3 Slide 5
Financial Management Def of Finance: the study of money The goal of
the financial manager: maximize market share or profits? best:
optimize shareholder value 4 Slide 6 Financial Management The Three
Main Decisions (Functions) of the financial manager: 1.Capital
budgeting or investment decisions 2.Capital structure or financing
decisions 3.Working capital management or day to day cash
management decisions (note: we will focus on the corporate world) 5
Slide 7 Sample Organizational Chart 6 Slide 8 The Agency Problem An
agency relationship is also called a fiduciary relationship. In an
agency relationship the represents the. An agency problem exists
when a exists between the agent and the principal. The solution for
the agency problem: tie management compensation to stock price
performance Corporate Scandals and Sarbanes Oxley Act of 2002. 7
Slide 9 8 Forms of Business Organization Characteristics: Sole
Proprietorship Partnership (General or Limited) Corporation Life of
Business Ability to Raise Cash Taxation Liability Transfer of
Ownership Slide 10 Forms of Business Organization Two forms of
business organization that take advantage of the benefits of a
corporation but avoid double taxation: S-Corp and LLC. Legal
information can be found on legal websites, such as: www.nolo.com
www.legalzoom.com www.nolo.com www.legalzoom.com 9 Slide 11
Financial Markets: Cash Flows between the Firm and the Financial
Markets 10 Slide 12 Financial Markets Primary vs. Secondary Markets
Secondary Markets: Dealer vs. Auction Markets - Dealer Market: No
physical location (over the counter OTC) for example: NASDAQ -
Auction Market: Physical location for example: NYSE, AMEX, CBOT 11
Slide 13 NYSE in the Digital Age Sarasota Herald Tribune, Feb 18
th, 2007, Page D 1 Traders on a crowded NYSE trading floor in
November 1968 Traders on the NYSE trading floor in November 2006.
Slide 14 Class Overview: Principles of Finance Goal of Financial
Manager: Three Main Decisions Ch 1: Introduction Ch 2 & 3:
Financial Statements, Ratios, Cash Flows Ch 5 & 6: Time Value
of Money Exam I Ch 7: Bond Valuation Ch 8: Stock Valuation Ch 9:
NPV and other Investment Criteria Ch 10: Making Capital Investment
Decisions Exam II Capital Budgeting Investing = Spending Money Long
Term Short Term Capital Structure Financing = Getting Money Working
Capital Management Ch 12: Capital Market History Ch 13: Risk,
Return and the Capital Asset Pricing Model Ch 14: Cost of Capital
& WACC Ch 16: Financial Leverage and Capital Structure
Cumulative Final Exam Optimize Shareholders Wealth 13
