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FUNDAMENTALS OF CORPORATE FINANCE

saklviTüal½yCatiRKb;RKg. National University of Management. mUldæanRKwHénhirBaØvtßúsaCIvkmµ. FUNDAMENTALS OF CORPORATE FINANCE. MBA PROGRAM. 2011 - 2012. Lecturer : Chey Vong. Table of Contents. Chapter 1 Introduction to Corporate Finance

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FUNDAMENTALS OF CORPORATE FINANCE

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  1. saklviTüal½yCatiRKb;RKg National University of Management mUldæanRKwHénhirBaØvtßúsaCIvkmµ FUNDAMENTALS OF CORPORATE FINANCE MBA PROGRAM 2011 - 2012 Lecturer : CheyVong

  2. Table of Contents Chapter 1 Introduction to Corporate Finance Chapter 2 Financial Statements, Taxes, and Cash Flow Chapter 3 Working with Financial Statements Chapter 4 Introduction to Valuation: The Time Value of Money Chapter 5 Discounted Cash Flow Valuation Chapter 6 Interest Rates and Bond Valuation Chapter 7 Stock Valuation Chapter 8 Net Present Value and Other Investment Criteria Chapter 9 Return, Risk, and the Security Market Line Chapter 10 Cost of Capital Corporate Finance 1

  3. Introduction to Corporate Finance Chapter 1 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

  4. The Four Basic Areas of Finance • Corporate Finance • Investments • Financial Institutions • International Finance Corporate Finance 3

  5. 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

  6. Board of Directors A Simplified Organizational Chart Chairman of the Board and Chief Executive Officer (CEO) President and Chief Operations Officer (COO) Vice President Marketing Vice President Finance (CFO) Vice President Production Treasurer Controller Cost Accounting Manager Credit Manager Tax Manager Cash Manager Financial Accounting Manager Data Processing Manager Capital Expenditures Financial Planning Corporate Finance 5

  7. Business Forms of Business Organization Partnership Corporation Proprietorship Corporate Finance 6

  8. If we were to consider possible financial goals , we might find some ideas like the following : The Goal of Financial Management • 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

  9. 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

  10. 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 • How do financial markets benefit society? Corporate Finance 9

  11. 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 In assets Current assets Fixed assets Financial Markets Short-term debt Long-term debt Equity shares B. Firm invests in assets Current Assets Fixed Assets A. Firm issues securities Financial Markets Short-term debt Long-term debt Equity shares F. Dividends and debt payments E. Retained cash flows C. Cash flow from firm’s assets D. Government Corporate Finance 10

  12. 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

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