Chapter 01 - Introduction to Corporate Finance 1-1 Copyright © 20 23 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education . Chapter 1 INTRODUCTION TO CORPORATE FINANCE SLIDES 1.1 Chapter 1: Introduction to Corporate Finance 1.2 Key Concepts and Skills 1.3 Chapter Outline 1.4 1.1 What Is Corporate Finance? 1.5 The Balance Sheet Model of the Firm 1.6 The Capital Budgeting Decision 1.7 The Capital Structure Decision 1.8 Short -Term Asset Management 1.9 The Financial Manager 1.10 Hypothetical Organization Chart 1.11 1.2 The Corporate Firm 1.12 Forms of Business Organization 1.13 A Comparison of Corporations and Partnerships 1.14 1.3 The Importance of Cash Flow 1.15 1.4 The Goal of Financi al Manage ment 1.16 1.5 The Agency Problem and Control of the Corporation 1.17 Manage ment Goals 1.18 Managing Managers 1.19 1.6 Regulation 1.20 Quick Quiz 1.21 End of Main Content 1.22 Accessibility Content: Text Alternatives for Images 1.23 Short -Term Asset Management Text Alternative 1.24 Hypothetical Organization Chart Text Alternative 1.25 1.3 The Importance of Cash Flows Text Alternative CHAPTER WEB SITES Section Web Address 1.1 CFO: www.cfo.com 1.2 ―Launch your Business‖: www.sba.gov 1.4 Business Ethics magazine: www.business -ethics.com 1.6 Sarbanes -Oxley survey: www.protiviti.com/US -
en/insights/sox -compliance -survey CHAPTER ORGANIZATION 1.1 What Is Corporate Finance? The Balance Sheet Model of the Firm Chapter 01 - Introduction to Corporate Finance 1-2 Copyright © 2019 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education . The Financial Manager 1.2 The Corporate Firm The Sole Proprietorship The Partnership The Corporation A Corporation by Another Name… 1.3 The Importance of Cash Flows Identification of Cash Flows Timing of Cash Flows Risk of Cash Flows 1.4 The Goal o f Financial Management Possible Goals The Goal of the Financial Manager A More General Goal 1.5 The Agency Problem and Control of t he Corporation Agency Relationships Management Goals Do Managers Act in the Stockholders‘ Interests? Stakeholders 1.6 Regulation The Securities Act of 1933 and the Securities Exchange Act of 1934 Sarbanes -Oxley ANNOTATED CHAPTER OUTLINE Slide 1. 1 Chapter 1: Introduction to Corporate Finance Slide 1. 2 Key Concepts and Skills Slide 1. 3 Chapter Outline PowerPoint Note : If there is a slide that you do not wish to include in your presentation, choose to hide the slide under the “Slide Show” menu, instead of deleting it . If you decide that you would like to use that slide at a later date, you can just unhide it. PowerPoint Note : Be sure to check out the notes that accompany some of the slides on the “Notes Pages” within PowerPoint. Chapter 01 - Introduction to Corporate Finance 1-3 Copyright © 201 9 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education . 1.1. What is Corporate Finance ? Slide 1. 4 1.1 What Is Corporate Finance ? Corporate finance addresses several important questions: 1. In what long -term assets should the firm invest ? (Capital budgeting) 2. How should the firm raise funds for required capital expenditures? (Capital st ructure) 3. How should short -term operating cash flows be managed? (Net working capital) A. The Balance Sheet Model of the Firm Slide 1. 5 The Balance Sheet Model of the Firm The Balance Sheet presents a picture of the firm at a point in time, and it provides a model by which to address the three basic questions that corporate finance managers must answer. Slide 1. 6 The Capital Budgeting Decision 1. Long -term investment decisions determine the level of fixed assets. Slide 1. 7 The Capital Structure D ecision 2. Financing policy determines the liabilities and equity side of the balance sheet. Slide 1. 8 Short -Term Asset Management 3. Short -term asset management choices (e.g., conservative versus aggressive) affect the level of net working capital. B. The Financial Manager Slide 1. 9 The Financial Manager Chapter 01 - Introduction to Corporate Finance 1-4 Copyright © 2019 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education . Financial Managers should make decisions that increase firm value, which effectively involve s three primary categories of financial decisions. 1. Capital budgeting – process of planning and managing a firm‘s investments in fixed assets . The key concerns are the size, timing , and risk of future cash flows. 2. Capital structure – mix of debt (borrowing) and equity (ownership interest) used by a firm . What are the least expensive sources of funds? Is th ere an optimal mix of debt and equity? When and where should the firm raise funds? 3. Working capital management – managing short -term assets and liabilities. How much inventory should the firm carry? What credit policy is best? Where will we get our shor t-
term loans? These broad categories, however, can be summarized with two concrete responsibilities: a. Selecting value creating projects b. Making smart financing decisions Slide 1. 10 Hypothetical Organization Chart The Chief Financial Officer (CFO) or Vice-President of Finance coordinates the activities of the treasurer and the controller. The controller handles cost and financial accounting, taxes , and information systems (i.e., data processing) . The treasurer handles cash and credit management, fina ncial planning , and capital expenditures. Video Note : The Role of the Chief Financial Officer - This video looks at the changing role of the CFO. 1.2. The Corporate Firm Slide 1.1 1 1.2 The Corporate Firm
en/insights/sox -compliance -survey CHAPTER ORGANIZATION 1.1 What Is Corporate Finance? The Balance Sheet Model of the Firm Chapter 01 - Introduction to Corporate Finance 1-2 Copyright © 2019 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education . The Financial Manager 1.2 The Corporate Firm The Sole Proprietorship The Partnership The Corporation A Corporation by Another Name… 1.3 The Importance of Cash Flows Identification of Cash Flows Timing of Cash Flows Risk of Cash Flows 1.4 The Goal o f Financial Management Possible Goals The Goal of the Financial Manager A More General Goal 1.5 The Agency Problem and Control of t he Corporation Agency Relationships Management Goals Do Managers Act in the Stockholders‘ Interests? Stakeholders 1.6 Regulation The Securities Act of 1933 and the Securities Exchange Act of 1934 Sarbanes -Oxley ANNOTATED CHAPTER OUTLINE Slide 1. 1 Chapter 1: Introduction to Corporate Finance Slide 1. 2 Key Concepts and Skills Slide 1. 3 Chapter Outline PowerPoint Note : If there is a slide that you do not wish to include in your presentation, choose to hide the slide under the “Slide Show” menu, instead of deleting it . If you decide that you would like to use that slide at a later date, you can just unhide it. PowerPoint Note : Be sure to check out the notes that accompany some of the slides on the “Notes Pages” within PowerPoint. Chapter 01 - Introduction to Corporate Finance 1-3 Copyright © 201 9 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education . 1.1. What is Corporate Finance ? Slide 1. 4 1.1 What Is Corporate Finance ? Corporate finance addresses several important questions: 1. In what long -term assets should the firm invest ? (Capital budgeting) 2. How should the firm raise funds for required capital expenditures? (Capital st ructure) 3. How should short -term operating cash flows be managed? (Net working capital) A. The Balance Sheet Model of the Firm Slide 1. 5 The Balance Sheet Model of the Firm The Balance Sheet presents a picture of the firm at a point in time, and it provides a model by which to address the three basic questions that corporate finance managers must answer. Slide 1. 6 The Capital Budgeting Decision 1. Long -term investment decisions determine the level of fixed assets. Slide 1. 7 The Capital Structure D ecision 2. Financing policy determines the liabilities and equity side of the balance sheet. Slide 1. 8 Short -Term Asset Management 3. Short -term asset management choices (e.g., conservative versus aggressive) affect the level of net working capital. B. The Financial Manager Slide 1. 9 The Financial Manager Chapter 01 - Introduction to Corporate Finance 1-4 Copyright © 2019 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education . Financial Managers should make decisions that increase firm value, which effectively involve s three primary categories of financial decisions. 1. Capital budgeting – process of planning and managing a firm‘s investments in fixed assets . The key concerns are the size, timing , and risk of future cash flows. 2. Capital structure – mix of debt (borrowing) and equity (ownership interest) used by a firm . What are the least expensive sources of funds? Is th ere an optimal mix of debt and equity? When and where should the firm raise funds? 3. Working capital management – managing short -term assets and liabilities. How much inventory should the firm carry? What credit policy is best? Where will we get our shor t-
term loans? These broad categories, however, can be summarized with two concrete responsibilities: a. Selecting value creating projects b. Making smart financing decisions Slide 1. 10 Hypothetical Organization Chart The Chief Financial Officer (CFO) or Vice-President of Finance coordinates the activities of the treasurer and the controller. The controller handles cost and financial accounting, taxes , and information systems (i.e., data processing) . The treasurer handles cash and credit management, fina ncial planning , and capital expenditures. Video Note : The Role of the Chief Financial Officer - This video looks at the changing role of the CFO. 1.2. The Corporate Firm Slide 1.1 1 1.2 The Corporate Firm
