STUDY
SUM
Principals of Managerial
Finance
CHAPTER 1
THE ROLE OF FINANCIAL MANAGEMENT
Gitman, Lawrence J, Zutter, Chad J
,Chapter 1
Principles of Managerial Finance
Chapter 1: The Role of Financial Management
1.1 Finance and Business 1.3 Managerial Finance Function
➢ What Is Finance? ➢ Organization of the Finance
➢ Career Opportunities in Finance. Function.
➢ Legal Forms of Business ➢ Relationship to Economics.
Organization. ➢ Relationship to Accounting.
➢ Why Study Managerial Finance? ➢ Primary Activities of the Financial
Manager.
1.2 Goal of the Firm
1.4 Governance and Agency
➢ Maximize Shareholder Wealth.
➢ Corporate Governance.
➢ Maximize Profit?
➢ The Agency Issue.
➢ What about Stakeholders?
➢ The Role of Business Ethics.
1.1 Finance and Business
What Is Finance?
• Finance can be defined as the science and art of managing money.
• At the personal level, finance is concerned with individuals’ decisions about
how much of their earnings they spend, how much they save, and how they
invest their savings.
• In a business context, finance involves the same types of decisions: how firms
raise money from investors, how firms invest money to earn a profit, and how
1
, Chapter 1
they decide whether to reinvest profits in the business or distribute them back
to investors.
Career Opportunities in Finance
• Careers in finance typically fall into one of two broad categories: (1) financial
services and (2) managerial finance.
• Financial services are the area of finance concerned with the design and
delivery of advice and financial products to individuals, businesses, and
governments. It involves a variety of interesting career opportunities within
the areas of banking, personal financial planning, investments, real-estate, and
insurance.
• Managerial finance is concerned with the duties of the financial manager
working in a business. Financial managers administer the financial affairs of all
types of businesses: private and public, large & small, profit seeking and not
for profit.
• In recent years, some factors have increased the importance and complexity
of the financial manager’s duties. These factors include the recent global fiscal
crisis and later responses by regulators, increased competition, and
technological change.
Legal Forms of Business Organization (table 1.1 is important, p.53)
• One of the most important decisions all businesses confront is how to choose
a legal form of organization. This decision has important financial implications
because how a business is organized legally influences the risks that the firm’s
owners must bear, how the firm can raise money, and how the firm’s profits
will be taxed.
• The three most common legal forms of business organization are the sole
proprietorship, the partnership, and the corporation.
2
SUM
Principals of Managerial
Finance
CHAPTER 1
THE ROLE OF FINANCIAL MANAGEMENT
Gitman, Lawrence J, Zutter, Chad J
,Chapter 1
Principles of Managerial Finance
Chapter 1: The Role of Financial Management
1.1 Finance and Business 1.3 Managerial Finance Function
➢ What Is Finance? ➢ Organization of the Finance
➢ Career Opportunities in Finance. Function.
➢ Legal Forms of Business ➢ Relationship to Economics.
Organization. ➢ Relationship to Accounting.
➢ Why Study Managerial Finance? ➢ Primary Activities of the Financial
Manager.
1.2 Goal of the Firm
1.4 Governance and Agency
➢ Maximize Shareholder Wealth.
➢ Corporate Governance.
➢ Maximize Profit?
➢ The Agency Issue.
➢ What about Stakeholders?
➢ The Role of Business Ethics.
1.1 Finance and Business
What Is Finance?
• Finance can be defined as the science and art of managing money.
• At the personal level, finance is concerned with individuals’ decisions about
how much of their earnings they spend, how much they save, and how they
invest their savings.
• In a business context, finance involves the same types of decisions: how firms
raise money from investors, how firms invest money to earn a profit, and how
1
, Chapter 1
they decide whether to reinvest profits in the business or distribute them back
to investors.
Career Opportunities in Finance
• Careers in finance typically fall into one of two broad categories: (1) financial
services and (2) managerial finance.
• Financial services are the area of finance concerned with the design and
delivery of advice and financial products to individuals, businesses, and
governments. It involves a variety of interesting career opportunities within
the areas of banking, personal financial planning, investments, real-estate, and
insurance.
• Managerial finance is concerned with the duties of the financial manager
working in a business. Financial managers administer the financial affairs of all
types of businesses: private and public, large & small, profit seeking and not
for profit.
• In recent years, some factors have increased the importance and complexity
of the financial manager’s duties. These factors include the recent global fiscal
crisis and later responses by regulators, increased competition, and
technological change.
Legal Forms of Business Organization (table 1.1 is important, p.53)
• One of the most important decisions all businesses confront is how to choose
a legal form of organization. This decision has important financial implications
because how a business is organized legally influences the risks that the firm’s
owners must bear, how the firm can raise money, and how the firm’s profits
will be taxed.
• The three most common legal forms of business organization are the sole
proprietorship, the partnership, and the corporation.
2
