Lec 01 & Lec 02 Introduction to Fm

Download Lec 01 & Lec 02 Introduction to Fm

Post on 13-Apr-2018

214 views

Category:

Documents

0 download

Embed Size (px)

TRANSCRIPT

<ul><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 1/21</p><p>FINANCIAL</p><p>MANAGEMENT</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 2/21</p><p> Introduction: Defnition, Scope and Objective o</p><p>Financia! Mana"e#ent$ %a&amp;ic Financia! Concept&amp;</p><p> Lon" Ter# Source&amp; O Finance</p><p>Capita! %ud"etin" 'rincipa! Tec(ni)ue&amp;</p><p> Concept and Mea&amp;ure#ent o Co&amp;t o Capita!</p><p> Ca&amp;( F!o*&amp; For Capita! %ud"etin"</p><p>Financia! State#ent and Ana!+&amp;i&amp; Levera"e and Capita! Structure Deci&amp;ion</p><p> or-in" Capita! Deci&amp;ion</p><p> Dividend 'o!ic+</p><p>S+!!abu&amp;</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 3/21</p><p>FORMS OFFORMS OF</p><p>BUSINESSBUSINESS</p><p>ORGANIZATIONORGANIZATION</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 4/21</p><p>FO.MS OF %/SINESSO.GANI0ATION</p><p>Three Organizational Forms</p><p>developed by Business Owners</p><p>Sole Proprietorship</p><p> General Partnership</p><p>Corporation</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 5/21</p><p>FO.MS OF %/SINESSO.GANI0ATION</p><p>DEF!TO!S</p><p>Sole</p><p>Proprietorship</p><p>General</p><p>Partnership</p><p>Corporation</p><p>"ny BusinessOwned and</p><p>Operated by anndividual</p><p>Two or #orePersons</p><p>Operating aBusiness $or a</p><p>Pro$it</p><p>%egislativelyCreated and&amp;egulated</p><p>Governan'e(Ownership and</p><p>Finan'ialStru'ture</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 6/21</p><p>FO.MS OF %/SINESSO.GANI0ATION</p><p>FO"TO!</p><p>SoleProprietorship</p><p>GeneralPartnership Corporation</p><p>!o Formalities or%egal</p><p>Do'umentation)#ay be mplied$rom Condu't or</p><p>"'tions</p><p>*ritten or Oral"greement or</p><p>#ay be mplied$rom Condu't or</p><p>"'tions</p><p>Filing o$ "rti'leso$ n'orporation</p><p>with Se'retary o$State andPayment o$</p><p>Fees</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 7/21</p><p>FO.MS OF %/SINESSO.GANI0ATION</p><p>GO+E&amp;!!G DOC,#E!TS</p><p>Sole</p><p>Proprietorship</p><p>General</p><p>Partnership Corporation</p><p>!one &amp;e-uired</p><p>!one &amp;e-uired)#ost have</p><p>"greementspe'i$ying &amp;ights(</p><p>Duties andObligations</p><p>"rti'les o$n'orporation</p><p>'reateCorporation)</p><p>Bylaws pres'ribeits Operation</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 8/21</p><p>FO.MS OF %/SINESSO.GANI0ATION</p><p>!"T,&amp;E OF O*!E&amp;S.P</p><p>SoleProprietorsh</p><p>ip</p><p>General</p><p>PartnershipCorporation</p><p>*holly Owned</p><p>by Singlendividual</p><p>For Contribution(Partner re'eives</p><p>Proportionate Shareo$ Pro$its/%ossesand Partnership</p><p>Property</p><p>&amp;esidual Claim onCorporate E-uity</p><p>and &amp;ight to +ote$or Dire'tors andEssentialGovernan'e</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 9/21</p><p>FO.MS OF %/SINESSO.GANI0ATION</p><p>%"B%T0</p><p>SoleProprietors</p><p>hip</p><p>GeneralPartnership</p><p>Corporation</p><p>Sole Proprietor</p><p>Personally%iable $or "llDebts and</p><p>Obligations</p><p>Partners are 1ointly</p><p>and Severally %iable$or all PartnershipObligations( in</p><p>Contra't and in Tort</p><p>Shareholder2s</p><p>%iability limited toE3tent o$ CapitalContribution4%imited %iability5</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 10/21</p><p>FO.MS OF %/SINESSO.GANI0ATION</p><p>T"6"TO!</p><p>SoleProprietors</p><p>hip</p><p>General</p><p>PartnershipCorporation</p><p>!ot a Ta3able</p><p>Entity) n'ome7%oss8 passesthrough to Sole</p><p>Proprietor</p><p>Partnership not aTa3able Entity)</p><p>"llo'ations o$n'ome and %oss</p><p>allowed withinPartnership be$ore</p><p>Pass9Through</p><p>Corporation ta3edas Separate EntityandDividends/CapitalGains also Ta3ed4Double Ta3ation5</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 11/21</p><p>FO.MS OF %/SINESSO.GANI0ATION</p><p>#"!"GE#E!T</p><p>Sole</p><p>Proprietorship</p><p>GeneralPartnership Corporation</p><p>Sole Proprietorhas Complete#anagement</p><p>Control</p><p>"ll Partners have</p><p>E-ual &amp;ights inPartnership2s</p><p>#anagement andCondu't</p><p>#anaged by Boardo$ Dire'tors ele'tedby Shareholders)Board may Delegate"uthority to</p><p>"ppointed O$$i'ers </p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 12/21</p><p>FO.MS OF %/SINESSO.GANI0ATION</p><p>T&amp;"!SFE&amp; O*!E&amp;S.P !TE&amp;ESTS</p><p>SoleProprietorshi</p><p>p</p><p>General</p><p>Partnership</p><p>Corporation</p><p>SoleProprietorship not</p><p>Trans$erable)Property andProdu'ts areTrans$erable</p><p>%imited &amp;ight o$</p><p>Trans$er sub:e'tto Consent by all</p><p>Partners</p><p>FreelyTrans$erable</p><p>through Formal7!0SE8 andn$ormal 7PrivateE-uity8 Capital</p><p>#ar;ets </p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 13/21</p><p>FO.MS OF %/SINESSO.GANI0ATION</p><p>*T.D&amp;"*"% OF O*!E&amp;</p><p>Sole</p><p>Proprietorship</p><p>GeneralPartnership Corporation</p><p>Terminates SoleProprietorship</p><p>Partner Death or*ithdrawal may</p><p>TerminatePartnership</p><p>Corporation has,nlimited %i$e</p><p>I t t</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 14/21</p><p> De&amp;pite o t(e variation&amp; bet*eenbu&amp;ine&amp;&amp;e&amp; t(e ba&amp;ic fnance i&amp;&amp;ue&amp; t(e+</p><p>ace are e&amp;&amp;entia!!+ t(e &amp;a#e$ T(e #o&amp;t i#portant activitie&amp; o a bu&amp;ine&amp;&amp;</p><p>fr# are</p><p>Intro uct on</p><p>I t d ti</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 15/21</p><p> Financia! Mana"e#ent peror#&amp; aci!itation,reconci!iation and contro!&amp; unction&amp; in an</p><p>or"ani1ation$ A!! t(e deci&amp;ion (avin" #onetar+ i#p!ication&amp;</p><p>co#e&amp; under t(e purvie* o fnancia!#ana"e#ent$</p><p> Financia! deci&amp;ion #a-in" invo!ve&amp; procure#ento und&amp; and t(eir opti#a! uti!i1ation t(rou"(inve&amp;t#ent, fnancin" dividend and *or-in"capita! deci&amp;ion&amp;$</p><p> T(e -e+ i&amp;&amp;ue in fnance are</p><p> (ere to rai&amp;e fnancia! re&amp;ource&amp; ro#</p><p> (ere to inve&amp;t t(e re&amp;ource&amp;</p><p> 2o* to be&amp;t #ana"e t(e production di&amp;tribution</p><p>Introduction</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 16/21</p><p>4$ Inve&amp;t#ent or Lon" Ter# A&amp;&amp;et Mi5 Deci&amp;ion Function o inve&amp;tin" rai&amp;ed und&amp; in a&amp;&amp;et&amp; are -no*n</p><p>a&amp; inve&amp;t#ent deci&amp;ion$ E5a#p!e&amp; inc!ude E5pan&amp;ion, Moderni1ation,</p><p>.ep!ace#ent o Lon" Ter# A&amp;&amp;et&amp;, . 6 D 7(avin" !on"</p><p>ter# i#p!ication&amp;8$</p><p>T(e 9 i#portant a&amp;pect o inve&amp;t#ent deci&amp;ion are7a8 Eva!uation o t(e pro&amp;pective proftabi!it+ o</p><p>ne* inve&amp;t#ent&amp;</p><p>7b8 T(e #ea&amp;ure#ent o a cuto; rate&lt; a"ain&amp;t t(at</p><p>t(e pro&amp;pective return o ne* inve&amp;t#ent&amp; cou!d</p><p>be co#pared$ Deci&amp;ion&amp; are ta-en in t(e !i"(t o t(eir i#pact on t(e</p><p>*ea!t( o &amp;(are(o!der&amp;$ T(e deci&amp;ion invo!ve (u"e capita! out!a+, (ave !on"</p><p>ter# i#p!ication&amp;, and are u&amp;ua!!+ irrever&amp;ib!e$</p><p>Finance Function&amp;</p><p>Fi F ti</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 17/21</p><p>9$ Financin" or Capita! Mi5 Deci&amp;ion Financin" deci&amp;ion&amp; are #ain!+ concerned *it( t(e</p><p>identifcation o potentia! &amp;ource&amp; o und&amp; andtappin" o t(e&amp;e &amp;ource&amp;$</p><p> Main i&amp;&amp;ue invo!ved in &amp;uc( deci&amp;ion&amp; are</p><p> (ere ro# to procure t(e re)ui&amp;ite und&amp;=</p><p>2o* #uc( &amp;(ou!d be t(e proportion o &amp;(ort ter#and !on" ter# und&amp;=</p><p> 2o* do t(e e5pectation&amp; o provider&amp; o eac(&amp;ource o capita! c(an"e *it( a!teration in capita!#i5=</p><p> (at &amp;(ou!d be t(e opti#a! #i5 o debt ande)uit+ in capita!=</p><p> T(e #i5 o debt and e)uit+ i&amp; -no*n a&amp; t(e fr#&gt;&amp;capita! &amp;tructure$</p><p> T(e+ deter#ine t(e fnancia! ri&amp;- prof!e o t(e</p><p>Finance Function&amp;</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 18/21</p><p>?$ Dividend or 'roft A!!ocation Deci&amp;ion Di&amp;tributin" return&amp; earned ro# a&amp;&amp;et&amp; to</p><p>&amp;(are(o!der&amp; are -no*n a&amp; dividend deci&amp;ion$ T(e fnancia! #ana"er #u&amp;t decided *(et(er t(e fr#</p><p>&amp;(ou!d di&amp;tribute a!! proft&amp;, or retain t(e#, ordi&amp;tribute a portion and retain t(e ba!ance$</p><p> Suc( a deci&amp;ion depend&amp; on trade o; bet*een t(e</p><p>uture fnancin" need&amp; o t(e fr# and currentcon&amp;u#ption re)uire#ent o &amp;(are(o!der&amp;$</p><p> T(e proportion o proft&amp; di&amp;tributed a&amp; dividend&amp; i&amp;ca!!ed t(e dividend pa+out ratio and t(e retained</p><p>portion o proft&amp; i&amp; -no*n a&amp; retention ratio$ Nor#a!!+ fr#&amp; o!!o* a po!ic+ o &amp;tab!e dividend, butfr#&amp; *it( (i"( "ro*t( rate "enera!!+ o;er&amp; a (i"(retention and !o* pa+out ratio$</p><p> Dividend&amp; are "enera!!+ paid in ca&amp;(, but it can a!&amp;obe "iven in or# o bonu&amp; &amp;(are&amp;$</p><p>nance unc on&amp;</p><p>F nance Funct on&amp;</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 19/21</p><p>@$ or-in" Capita! Deci&amp;ion Li)uidit+ Deci&amp;ion or-in" Capita! deci&amp;ion&amp; are re!ated to t(e</p><p>#ana"e#ent o current a&amp;&amp;et&amp;$ T(e t*o -e+ deci&amp;ion point&amp; in *or-in" capita!</p><p>#ana"e#ent are !eve! o inve&amp;t#ent in current a&amp;&amp;et&amp;</p><p>and fnancin" o &amp;uc( a&amp;&amp;et&amp;$</p><p>Current a&amp;&amp;et #ana"e#ent a;ect t(e fr#&gt;&amp; !i)uidit+$</p><p> A fr# atte#pt&amp; to ba!ance ca&amp;( in3o*&amp; and out3o*&amp;</p><p>*(i!e peror#in" t(e&amp;e unction&amp;$ T(e&amp;e are ca!!ed</p><p>!i)uidit+ deci&amp;ion&amp;$</p><p>A con3ict e5i&amp;t&amp; bet*een proftabi!it+ and !i)uidit+*(i!e #ana"in" current a&amp;&amp;et&amp;$ 2ence, a proper</p><p>tradeo; #u&amp;t be ac(ieved bet*een proftabi!it+ and</p><p>!i)uidit+$</p><p>F nance Funct on&amp;</p><p>Obj ti Fi</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 20/21</p><p>9B</p><p>Objective of the Firm the primary goal of the</p><p>rm is to maximize stockholer !ealth</p><p>"ealth #aximization vers$s Prot#aximization</p><p>%iming prot maximization oes not takeinto acco$nt the timing of earnings&amp; !hile!ealth maximization oes'</p><p>(isk !ealth maximization takes risk intoacco$nt prot maximization oes not'</p><p>)ivien payments if prot maximization</p><p>!as the goal&amp; a rm !o$l never pay</p><p>Objective o Fir#</p><p>Obj ti Fi</p></li><li><p>7/26/2019 Lec 01 &amp; Lec 02 Introduction to Fm</p><p> 21/21</p><p>94</p><p>"ealth #aximization vers$s Prot</p><p>#aximization *cont+</p><p>,$alitative factors proft #a5i#i1ationdoe&amp; not ta-e into account uture activitie&amp;&amp;uc( a&amp; &amp;a!e&amp; "ro*t(, &amp;tabi!it+ anddiver&amp;ifcation'</p><p>Stock price maximization &amp;ince inve&amp;tor&amp;*ant to #a5i#i1e t(eir o*n *ea!t(, t(e+ preer</p><p>t(e fr# adopt &amp;trate"ie&amp; t(at *i!! #a5i#i1e&amp;toc- price'</p><p>Objective o Fir#</p></li></ul>