Chapter 1: Goals and governance
of the corporation
1.1 Investments and financing decisions
Investment decision = capital budgeting
= purchase of assets
What will we “acquire” with our money? What to do with our money?
Tangible or intangible assets
Also called CAPEX (capital expenditures
Financing decisions
= sale of financial assets
Raising money from investors Where to get our money?
Equity versus debt
Short term VS long term (~raising capital)
1.2 What is a corporation?
What is a corporation?
Articles of incorporation (= legal docs)
Purpose and governance
Corporation = distinct legal entity limited liability for the owners
Corporation owns real assets
Indirect ownership for the shareholders through financial assets (shares)
Publicly held VS privately (=closely held)
Not corporations
Unlimited liability
Sole proprietorship (1-man)
Partnership (>1-man)
of the corporation
1.1 Investments and financing decisions
Investment decision = capital budgeting
= purchase of assets
What will we “acquire” with our money? What to do with our money?
Tangible or intangible assets
Also called CAPEX (capital expenditures
Financing decisions
= sale of financial assets
Raising money from investors Where to get our money?
Equity versus debt
Short term VS long term (~raising capital)
1.2 What is a corporation?
What is a corporation?
Articles of incorporation (= legal docs)
Purpose and governance
Corporation = distinct legal entity limited liability for the owners
Corporation owns real assets
Indirect ownership for the shareholders through financial assets (shares)
Publicly held VS privately (=closely held)
Not corporations
Unlimited liability
Sole proprietorship (1-man)
Partnership (>1-man)
