Corporate finance chapter 01 what is finance

Chapter 1:
What is Finance?
Objective
1

To Define Finance
The Value of Finance
Introduction to
the Players


Chapter 1 Contents
• 1 Defining Finance

• 7 The Goal of management

• 2 Why Study Finance

• 8 Market Discipline-Takeovers

• 3 Household Finance
• 4 Financial Decisions--Firms

• 9 Role of the Financial
Specialists in a Corporation

• 5 Forms of Business
Organization
• 6 Separation of Ownership
and Management
2

Important Terms
• Assets
• Personal investing & Asset allocation
• Liability, Debt
• Net Worth = Assets - Liabilities
• Exogenous and endogenous elements
3


(1.9) The Roles of Corporate
Financial Specialists
• Financial executive--a person with authority in
the following functions:
B o a r d o f D ir e c t o r s
C h ie f E x e c u t iv e O ffic e r
V P O p e r a t io n s

C h ie f F in a n c ia l O ffic e r

V P M a r k e t in g

T re a s u re r

V P F in a n c ia l P la n n in g

C o m p t r o le r

4

Financial Functions in a
Corporation:
• Planning
• Provision of Capital
• Administration of Funds
• Accounting and Control
• Protection of Assets
• Tax Administration
• Investor Relations
• Evaluation and Consulting
• Management Information Systems
5


Planning
– long and short-term financial planning
– budgeting for capital expenditures
– budgeting for operations
– sales forecasting
– performance evaluation
– pricing policies
– economic appraisals
– analysis of acquisitions and divestments
6


Accounting and Control
– establishment of accounting policies

– development & reporting of accounting data
– cost standards
– internal auditing
– systems and procedures (accounting)
– government reporting
– reporting & interpreting operations results
– comparing performance with operating plans and
standards
7