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8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 135
Overview of FinancialManagement
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 235
Goal of the Firm
1) Profit Maximization
this goal ignores
a) TIMING of Returns
(Time Value of Money) b) UNCERTAINTY of Returns
(Risk)
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 335
Goal of the Firm
2) Shareholder WealthMaximization
this is the same as
a) Maximizing Firm Value
b) Maximizing Stock Price
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 435
Stock Prices and Shareholder
Value
The primary financial goal of management is
shareholder wealth maximization whichtranslates to maximizing stock price Value of any asset is present value of cash flow
stream to owners Most significant decisions are evaluated in terms
of their financial consequences Stock prices change over time as conditions
change and as investors obtain new informationabout a companyrsquos prospects
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 535
Determinants of Stock Prices
1-5
ldquoExpectedrdquoInvestor Returns ldquoPerceivedrdquoRisk
Managerial Actions the Economic
Environment Taxes and the Political Climate
StockrsquosPrice
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 635
What determines a firmrsquosfundamental or intrinsic value
Intrinsic value is the sum of all the futureexpected free cash flows when converted
into todayrsquos dollars
Value = + + hellip +FCF1 FCF2 FCF
infin
(1 + WACC)1 (1 + WACC)infin(1 + WACC)2
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 735
7
What three aspects of cash flowsaffect an investmentrsquos value
Amount of expected cash flows (bigger is
better)
Timing of the cash flow stream (sooner is
better) Risk of the cash flows (less risk is better)
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 835
8
Free Cash Flows (FCF)
Free cash flows are the cash flows that are
available (or free) for distribution to allinvestors (stockholders and creditors)
FCF = sales revenues - operating costs -operating taxes - required investments inoperating capital
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 935
Profit vs Cash
Financial Management - Reza Masri 9
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1035
Profit vs Cash
Financial Management - Reza Masri 10
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1135
Profit vs Cash
Financial Management - Reza Masri 11
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1235
Profit vs Cash
Financial Management - Reza Masri 12
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1335
Profit vs Cash
Financial Management - Reza Masri 13
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1435
Profit vs Cash
Financial Management - Reza Masri 14
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 235
Goal of the Firm
1) Profit Maximization
this goal ignores
a) TIMING of Returns
(Time Value of Money) b) UNCERTAINTY of Returns
(Risk)
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 335
Goal of the Firm
2) Shareholder WealthMaximization
this is the same as
a) Maximizing Firm Value
b) Maximizing Stock Price
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 435
Stock Prices and Shareholder
Value
The primary financial goal of management is
shareholder wealth maximization whichtranslates to maximizing stock price Value of any asset is present value of cash flow
stream to owners Most significant decisions are evaluated in terms
of their financial consequences Stock prices change over time as conditions
change and as investors obtain new informationabout a companyrsquos prospects
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 535
Determinants of Stock Prices
1-5
ldquoExpectedrdquoInvestor Returns ldquoPerceivedrdquoRisk
Managerial Actions the Economic
Environment Taxes and the Political Climate
StockrsquosPrice
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 635
What determines a firmrsquosfundamental or intrinsic value
Intrinsic value is the sum of all the futureexpected free cash flows when converted
into todayrsquos dollars
Value = + + hellip +FCF1 FCF2 FCF
infin
(1 + WACC)1 (1 + WACC)infin(1 + WACC)2
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 735
7
What three aspects of cash flowsaffect an investmentrsquos value
Amount of expected cash flows (bigger is
better)
Timing of the cash flow stream (sooner is
better) Risk of the cash flows (less risk is better)
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 835
8
Free Cash Flows (FCF)
Free cash flows are the cash flows that are
available (or free) for distribution to allinvestors (stockholders and creditors)
FCF = sales revenues - operating costs -operating taxes - required investments inoperating capital
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 935
Profit vs Cash
Financial Management - Reza Masri 9
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1035
Profit vs Cash
Financial Management - Reza Masri 10
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1135
Profit vs Cash
Financial Management - Reza Masri 11
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1235
Profit vs Cash
Financial Management - Reza Masri 12
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1335
Profit vs Cash
Financial Management - Reza Masri 13
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1435
Profit vs Cash
Financial Management - Reza Masri 14
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 335
Goal of the Firm
2) Shareholder WealthMaximization
this is the same as
a) Maximizing Firm Value
b) Maximizing Stock Price
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 435
Stock Prices and Shareholder
Value
The primary financial goal of management is
shareholder wealth maximization whichtranslates to maximizing stock price Value of any asset is present value of cash flow
stream to owners Most significant decisions are evaluated in terms
of their financial consequences Stock prices change over time as conditions
change and as investors obtain new informationabout a companyrsquos prospects
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 535
Determinants of Stock Prices
1-5
ldquoExpectedrdquoInvestor Returns ldquoPerceivedrdquoRisk
Managerial Actions the Economic
Environment Taxes and the Political Climate
StockrsquosPrice
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 635
What determines a firmrsquosfundamental or intrinsic value
Intrinsic value is the sum of all the futureexpected free cash flows when converted
into todayrsquos dollars
Value = + + hellip +FCF1 FCF2 FCF
infin
(1 + WACC)1 (1 + WACC)infin(1 + WACC)2
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 735
7
What three aspects of cash flowsaffect an investmentrsquos value
Amount of expected cash flows (bigger is
better)
Timing of the cash flow stream (sooner is
better) Risk of the cash flows (less risk is better)
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 835
8
Free Cash Flows (FCF)
Free cash flows are the cash flows that are
available (or free) for distribution to allinvestors (stockholders and creditors)
FCF = sales revenues - operating costs -operating taxes - required investments inoperating capital
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 935
Profit vs Cash
Financial Management - Reza Masri 9
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1035
Profit vs Cash
Financial Management - Reza Masri 10
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1135
Profit vs Cash
Financial Management - Reza Masri 11
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1235
Profit vs Cash
Financial Management - Reza Masri 12
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1335
Profit vs Cash
Financial Management - Reza Masri 13
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1435
Profit vs Cash
Financial Management - Reza Masri 14
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 435
Stock Prices and Shareholder
Value
The primary financial goal of management is
shareholder wealth maximization whichtranslates to maximizing stock price Value of any asset is present value of cash flow
stream to owners Most significant decisions are evaluated in terms
of their financial consequences Stock prices change over time as conditions
change and as investors obtain new informationabout a companyrsquos prospects
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 535
Determinants of Stock Prices
1-5
ldquoExpectedrdquoInvestor Returns ldquoPerceivedrdquoRisk
Managerial Actions the Economic
Environment Taxes and the Political Climate
StockrsquosPrice
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 635
What determines a firmrsquosfundamental or intrinsic value
Intrinsic value is the sum of all the futureexpected free cash flows when converted
into todayrsquos dollars
Value = + + hellip +FCF1 FCF2 FCF
infin
(1 + WACC)1 (1 + WACC)infin(1 + WACC)2
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 735
7
What three aspects of cash flowsaffect an investmentrsquos value
Amount of expected cash flows (bigger is
better)
Timing of the cash flow stream (sooner is
better) Risk of the cash flows (less risk is better)
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 835
8
Free Cash Flows (FCF)
Free cash flows are the cash flows that are
available (or free) for distribution to allinvestors (stockholders and creditors)
FCF = sales revenues - operating costs -operating taxes - required investments inoperating capital
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 935
Profit vs Cash
Financial Management - Reza Masri 9
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1035
Profit vs Cash
Financial Management - Reza Masri 10
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1135
Profit vs Cash
Financial Management - Reza Masri 11
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1235
Profit vs Cash
Financial Management - Reza Masri 12
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1335
Profit vs Cash
Financial Management - Reza Masri 13
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1435
Profit vs Cash
Financial Management - Reza Masri 14
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 535
Determinants of Stock Prices
1-5
ldquoExpectedrdquoInvestor Returns ldquoPerceivedrdquoRisk
Managerial Actions the Economic
Environment Taxes and the Political Climate
StockrsquosPrice
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 635
What determines a firmrsquosfundamental or intrinsic value
Intrinsic value is the sum of all the futureexpected free cash flows when converted
into todayrsquos dollars
Value = + + hellip +FCF1 FCF2 FCF
infin
(1 + WACC)1 (1 + WACC)infin(1 + WACC)2
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 735
7
What three aspects of cash flowsaffect an investmentrsquos value
Amount of expected cash flows (bigger is
better)
Timing of the cash flow stream (sooner is
better) Risk of the cash flows (less risk is better)
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 835
8
Free Cash Flows (FCF)
Free cash flows are the cash flows that are
available (or free) for distribution to allinvestors (stockholders and creditors)
FCF = sales revenues - operating costs -operating taxes - required investments inoperating capital
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 935
Profit vs Cash
Financial Management - Reza Masri 9
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1035
Profit vs Cash
Financial Management - Reza Masri 10
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1135
Profit vs Cash
Financial Management - Reza Masri 11
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1235
Profit vs Cash
Financial Management - Reza Masri 12
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1335
Profit vs Cash
Financial Management - Reza Masri 13
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1435
Profit vs Cash
Financial Management - Reza Masri 14
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 635
What determines a firmrsquosfundamental or intrinsic value
Intrinsic value is the sum of all the futureexpected free cash flows when converted
into todayrsquos dollars
Value = + + hellip +FCF1 FCF2 FCF
infin
(1 + WACC)1 (1 + WACC)infin(1 + WACC)2
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 735
7
What three aspects of cash flowsaffect an investmentrsquos value
Amount of expected cash flows (bigger is
better)
Timing of the cash flow stream (sooner is
better) Risk of the cash flows (less risk is better)
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 835
8
Free Cash Flows (FCF)
Free cash flows are the cash flows that are
available (or free) for distribution to allinvestors (stockholders and creditors)
FCF = sales revenues - operating costs -operating taxes - required investments inoperating capital
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 935
Profit vs Cash
Financial Management - Reza Masri 9
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1035
Profit vs Cash
Financial Management - Reza Masri 10
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1135
Profit vs Cash
Financial Management - Reza Masri 11
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1235
Profit vs Cash
Financial Management - Reza Masri 12
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1335
Profit vs Cash
Financial Management - Reza Masri 13
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1435
Profit vs Cash
Financial Management - Reza Masri 14
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 735
7
What three aspects of cash flowsaffect an investmentrsquos value
Amount of expected cash flows (bigger is
better)
Timing of the cash flow stream (sooner is
better) Risk of the cash flows (less risk is better)
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 835
8
Free Cash Flows (FCF)
Free cash flows are the cash flows that are
available (or free) for distribution to allinvestors (stockholders and creditors)
FCF = sales revenues - operating costs -operating taxes - required investments inoperating capital
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 935
Profit vs Cash
Financial Management - Reza Masri 9
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1035
Profit vs Cash
Financial Management - Reza Masri 10
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1135
Profit vs Cash
Financial Management - Reza Masri 11
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1235
Profit vs Cash
Financial Management - Reza Masri 12
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1335
Profit vs Cash
Financial Management - Reza Masri 13
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1435
Profit vs Cash
Financial Management - Reza Masri 14
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 835
8
Free Cash Flows (FCF)
Free cash flows are the cash flows that are
available (or free) for distribution to allinvestors (stockholders and creditors)
FCF = sales revenues - operating costs -operating taxes - required investments inoperating capital
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 935
Profit vs Cash
Financial Management - Reza Masri 9
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1035
Profit vs Cash
Financial Management - Reza Masri 10
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1135
Profit vs Cash
Financial Management - Reza Masri 11
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1235
Profit vs Cash
Financial Management - Reza Masri 12
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1335
Profit vs Cash
Financial Management - Reza Masri 13
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1435
Profit vs Cash
Financial Management - Reza Masri 14
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 935
Profit vs Cash
Financial Management - Reza Masri 9
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1035
Profit vs Cash
Financial Management - Reza Masri 10
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1135
Profit vs Cash
Financial Management - Reza Masri 11
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1235
Profit vs Cash
Financial Management - Reza Masri 12
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1335
Profit vs Cash
Financial Management - Reza Masri 13
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1435
Profit vs Cash
Financial Management - Reza Masri 14
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1035
Profit vs Cash
Financial Management - Reza Masri 10
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1135
Profit vs Cash
Financial Management - Reza Masri 11
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1235
Profit vs Cash
Financial Management - Reza Masri 12
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1335
Profit vs Cash
Financial Management - Reza Masri 13
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1435
Profit vs Cash
Financial Management - Reza Masri 14
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1135
Profit vs Cash
Financial Management - Reza Masri 11
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1235
Profit vs Cash
Financial Management - Reza Masri 12
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1335
Profit vs Cash
Financial Management - Reza Masri 13
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1435
Profit vs Cash
Financial Management - Reza Masri 14
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1235
Profit vs Cash
Financial Management - Reza Masri 12
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1335
Profit vs Cash
Financial Management - Reza Masri 13
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1435
Profit vs Cash
Financial Management - Reza Masri 14
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1335
Profit vs Cash
Financial Management - Reza Masri 13
ACCOUNTING
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1435
Profit vs Cash
Financial Management - Reza Masri 14
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1435
Profit vs Cash
Financial Management - Reza Masri 14
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1535
Profit vs Cash
Financial Management - Reza Masri 15
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1735
17
What is the weighted average
cost of capital (WACC)
WACC is the average rate of return required by
all of the companyrsquos investors
WACC is affected by
Capital structure (the firmrsquos relative use of debt and
equity as sources of financing)
Interest rates
Risk of the firm
Investorsrsquo overall attitude toward risk
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1835
Value Maximization
Financial Management - Reza Masri 18
Risk ampReturn
Valuation
Investment Decisions
Financing Decisions
Income DistributionDecision
ValueMaximization
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 1935
Financial Managementamp Other Fields of Management
FinancialManagement
Math ampStatistics
Accounting
SocialSciences
OperationManagement
ETHICS
Economics
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2035
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2135
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2235
22
Becoming a Public Corporation
and Growing Afterwards
Initial Public Offering (IPO) of Stock
Raises cash
Allows founders and pre-IPO investors toldquoharvestrdquo some of their wealth
Subsequent issues of debt and equity
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2335
Conflicts Between Managers and
Stockholders
Managers are naturally inclined to act in their
own best interests (which are not always thesame as the interest of stockholders)
But the following factors affect managerial
behavior Managerial compensation packages Direct intervention by shareholders
The threat of firing The threat of takeover
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2435
24
Agency Problems and
Corporate Governance
Agency problem managers may act in their own
interests and not on behalf of owners(stockholders)
Corporate governance is the set of rules that
control a companyrsquos behavior towards itsdirectors managers employees shareholderscreditors customers competitors andcommunity
Corporate governance can help control agencyproblems
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2535
Conflicts Between Stockholders and
Bondholders
Stockholders are more likely to prefer riskier
projects because they receive more of theupside if the project succeeds By contrastbondholders receiving fixed payments are more
interested in limiting risk Bondholders are particularly concerned about
the use of additional debt
Bondholders attempt to protect themselves byincluding covenants in bond agreements thatlimit the use of additional debt and constrain
managersrsquo actions
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2635
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2735
Investment Bankingamp Investment Management
Financial Management - Reza Masri 27
Corporations
Investment
BankingHouses
Investors
Securities Securities
Dollars Dollars
Sell Side Underwriting amp selling
corporations securities to investors
Buy Side Advising investors ampmanaging investors fund in buying
securities
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2835
28
What are some types of
markets
A market is a method of exchanging one
asset (usually cash) for another asset
Physical assets vs financial assets
Spot versus future markets Money versus capital markets
Primary versus secondary markets
Private versus public markets
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 2935
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3035
Capital MarketsSelected Comparison (ASEAN)
983088983086983088
983089983088983088983086983088
983090983088983088983086983088
983091983088983088983086983088983092983088983088983086983088
983093983088983088983086983088
983094983088983088983086983088
983095983088983088983086983088 983094983088983091983086983097
983091983096983088983086983089
983091983091983094983086983095 983090983096983088983086983094
983089983092983088983086983097
983091983090983086983093
983117983137983154983147983141983156 983107983137983152983145983156983137983148983145983162983137983156983145983151983150 (983125983123983108 983138983145983148983148983145983151983150983155983081
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3135
Capital Markets
Selected Comparison (ASEAN)
983088
983090983088983088
983092983088983088
983094983088983088
983096983088983088
983089983084983088983088983088983097983096983092
983095983096983089 983095983091983093
983093983092983097
983092983089983093
983090983093983094
983118983157983149983138983141983154 983151983142 983113983155983155983157983141983154983155
as of Nov 2010
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3235
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3335
Financial Management - Reza Masri 33
Financial Markets
Implications of active financial markets FINANCING alternatives for corporations INVESTMENT alternatives for investors
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3435
34
Why is corporate finance
important to all managers
Corporate finance provides the skills
managers need to Identify and select the corporate strategies and
individual projects that add value to their firm
Forecast the funding requirements of theircompany and devise strategies for acquiringthose funds
8112019 Ch 01 Fin Mgt Overview - General-new
httpslidepdfcomreaderfullch-01-fin-mgt-overview-general-new 3535