Learning Objectives
1. Understand the importance of finance in your personal and professional lives and identify the three primary business decisions that financial managers make.
2. Identify the key differences between the three major legal forms of business.
3. Understand the role of the financial manager within the firm and the goal for making financial choices.
4. Explain the five principles of finance that form the basis of financial management for both businesses and individuals.
FINANCE: AN OVERVIEW
Three Basic Questions Addressed by the Study of Finance:
1. What long-term investments should the firm undertake?
2. How should the firm raise money to fund these investments?
3. How can the firm best manage its cash flows as they arise in its day-to-day operations?
Why Study Finance?
Knowledge of financial tools is critical to making good decisions in both corporate world and personal lives.
- How will GM's strategic decision to invest $740 million to produce the Chevy Volt require the expertise of different disciplines within the business school?
The Goal of the Financial Manager
The goal of the financial manager must be consistent with the mission of the corporation, which is to maximize shareholder's wealth.
To achieve sustainable growth, we have established a vision with clear goals for:
- Profit
- People
- Portfolio
- Partners
- Planet
- What do we mean by Ethics?
- Give examples of recent financial scandals and discuss what went wrong from an ethical perspective.
THE FIVE BASIC PRINCIPLES OF FINANCE
Value
Cash Flows Are the Source of Value
Incremental Cash Flow