Corporate Finance Summary (Untill CH8)

Financial management n tax


CHAPTER 1. GOALS AND GOVERNANCE OF THE CORPORATION

1. Investment and Financing decisions

2. What is corporation

3. Who is the financial Manager

4. Agency problems

5. Goals of the corporation

6. The ethics of maximizing value

7. Careers in finance



1. Investment and financial decisions



Capital budgeting decision

 Decision to invest in tangible or intangible assets



Also called:

- Investment decision
- Capital Expenditure decision ( CAPEX )



Tangible assets

 Southwest airlines
 Purchase new planes



Intangible assets

 GlaxoSmithKline
 R&D Expenditures



Financing Decision

 Decision on the sources and amounts of financing.

Capital Structure

 The mix of long-term debt and equity financing

,Financial management n tax




Real assets

 Assets used to produce goods and services

Financial assets

 Financial claims to the income generated by the firm’s real assets. ( Securities, bonds, stocks)



Exercise




2. What is a corporation?

Corporation

 A business organized as a separate legal entity owned by stockholders.

Types of corporations

- Public companies
- Private corporation
- Limited liability corporation

, Financial management n tax




Types of business organizations

- Sole proprietorships
- Partnerships
- Corporations
- Limited liability options
o Limited liability partnerships
o Limited liability Corporations
o Professional corporations
- Limited liability
o The owners of a corporation are not personally liable for its obligations.