◊Managerial Finance: concerned with the financial management of a firm
Buying/selling assets
Financing choices
Control cost
◊Investing: concerned with purchasing & holding assets and securities
Stocks
Bonds
◊Financial Markets
Monet market – places where short-term securities are traded
Capital market – long-term money
Financial intermediaries – banks and our credit unions
Major Principles of Finance
◊Risk – return tradeoff
The higher the risk, the higher the return you require
◊Time Value of Money
Present value
◊Cash is King (not profits)
The company has to have cash, or at least, access to cash
Not always concerned with profits, concerned with having cash or good cash flow
◊Incremental cash flow
The change or improvement in cash flows
◊Competitive Markets
The way we do business is efficient because of competition
◊Efficient Capital Markets
Information spreads quickly and its reflected in the stock price
◊Agency issue
Who do managers really work for?
◊Tax impact
Investment decisions should be viewed after tax
◊Diversification
Safety with diversification
◊Ethics
Be ethical in our decisions and our actions
Business Organization Set-up
◊Sole Proprietorship – one person
Taxation: personal taxes – paid once
Liability: on the sole proprietor
Raising capital: more difficult time
Selling: accept an offer from someone else
Continuity: to change it to some type of a limited liability or corporation, or even a sub chapter
◊General Partnership – two or more general partners
Taxation: don't pay taxes themselves, tax consequences are given to their partners
Liability: responsible for the actions of others
Raising capital: easier to raise money than just having one person
Selling: more of a challenge
◊Limited Partnership
Taxation: don't pay taxes themselves, tax consequences are given to their partners
FIN 300 Final Exam Study Guide
Lecture 1: Course Introduction
Finance – The science of managing money matter (Webster)
Three areas of Finance
Liability: you can only lose what you put in
Selling: more of a challenge
◊LLP – Limited Liability Partnership (hybrid) – taking the benefit of that limited liability of a corporation with
some of the benefits up the partnerships
Taxation: don't pay taxes themselves, tax consequences are given to their partners
◊Corporation – a legal entity
Taxation: receive the dividends and declare them as income and pay taxes
Continuity: it lives forever
◊Subchapter S Corporation – Family Companies
getting that liability but also then some of the benefits of some of the tax consequences
Lecture 2: Interest Rates and Taxes
Financial Markets
◊Purpose: bring the sources of capital and the user of capital together
◊Corporate financing trends:
Bonds – 75.5% (debt)
Preferred stock – 4.1%
Common stock – 20.4% (equity)
