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Copyright 2002 by Harcourt, Inc. All rights reserved.
CHAPTE !An "vervie# o$ %inancial &anage'ent
ole o$ $inancial 'anage'ent
Career opportunities
%or's o$ business organi(ation
)oals o$ the corporationIssues o$ the ne# 'illeniu'
Agency relationships
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Copyright 2002 by Harcourt, Inc. All rights reserved.
*hat causes a co'pany to have a particular stoc+value
Ho# can 'anagers 'a+e choices that add value totheir co'panies
Ho# can 'anagers ensure that their co'panies don-trun out o$ cash #hile eecuting their plans
*hat three /uestions does $inancial
'anage'ent see+ to ans#er
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Copyright 2002 by Harcourt, Inc. All rights reserved.
ole proprietorship
Partnership
Corporation
Alternative %or's o$
1usiness "rgani(ation
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Copyright 2002 by Harcourt, Inc. All rights reserved.
Advantages
Ease o$ $or'ation
ub3ect to $e# regulations4o corporate inco'e taes
5isadvantages
6i'ited li$e
7nli'ited liability
5i$$icult to raise capital
ole Proprietorship
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Copyright 2002 by Harcourt, Inc. All rights reserved.
A partnership has roughly the sa'eadvantages and disadvantages as asole proprietorship.
Partnership
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Copyright 2002 by Harcourt, Inc. All rights reserved.
Advantages
7nli'ited li$e
Easy trans$er o$ o#nership6i'ited liability
Ease o$ raising capital
5isadvantages5ouble taation
Cost o$ set8up and report $iling
Corporation
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Copyright 2002 by Harcourt, Inc. All rights reserved.
The pri'ary goal is shareholder #ealth'ai'i(ation, #hich translates to
'ai'i(ing stoc+ price.hould $ir's behave ethically 9E:
5o $ir's have any responsibilities to
society at large9E: hareholdersare also 'e'bers o$ society.
)oals o$ the Corporation
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Copyright 2002 by Harcourt, Inc. All rights reserved.
Is 'ai'i(ing stoc+ price good $or
society, e'ployees, and custo'ersE'ploy'ent gro#th is higher in $ir's
that try to 'ai'i(e stoc+ price. "n
average, e'ploy'ent goes up in$ir's that 'a+e 'anagers into
o#ners ;such as 61" $ir's