COMPLETE summary ch 1-21 corporate finance

Chapter 1 The Role of Managerial Finance 3 CH (1) - The Role of Managerial Finance Learning Goals LG1 Define finance and the managerial finance function. LG2 Describe the legal forms of business organization. LG3 Describe the goal of the firm, and explain why maximizing the value of the firm is an appropriate goal for a business LG4 Describe how the managerial finance function is related to economics and accounting. LG5 Identify the primary activities of the financial manager. LG6 Describe the nature of the principle-agent relationship between the owners and managers of a corporation, and explain how various corporate governance mechanisms attempt to manage agency problems 4 CH (1) - The Role of Managerial Finance 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 they decide whether to reinvest profits in the business or distribute them back to investors. 5 CH (1) - The Role of Managerial Finance Career Opportunities in Finance: Financial Services • Financial Services is the area of finance concerned with the design and delivery of advice and financial products to individuals, businesses, and governments. • Career opportunities include banking, personal financial planning, investments, real estate, and insurance. 6 CH (1) - The Role of Managerial Finance Career Opportunities in Finance: Managerial Finance • 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 and small, profit-seeking and not-for-profit. • They perform such varied tasks as developing a financial plan or budget, extending credit to customers, evaluating proposed large expenditures, and raising money to fund the firm’s operations. 7 CH (1) - The Role of Managerial Finance • The recent global financial crisis and subsequent responses by governmental regulators, increased global competition, and rapid technological change also increase the importance and complexity of the financial manager’s duties. • Increasing globalization has increased demand for financial experts who can manage cash flows in different currencies and protect against the risks that naturally arise from international transactions. Career Opportunities in Finance: Managerial Finance 8 CH (1) - The Role of Managerial Finance Focus on Practice Professional Certifications in Finance: • Chartered Financial Analyst (CFA) – Offered by the CFA Institute, the CFA program is a graduate-level course of study focused primarily on the investments side of finance. • Certified Treasury Professional (CTP) – The CTP program requires students to pass a single exam that is focused on the knowledge and skills needed for those working in a corporate treasury department. • Certified Financial Planner (CFP) – To obtain CFP status, students must pass a ten-hour exam covering a wide range of topics related to personal financial planning.