财务管理英文课件 (2).ppt
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1、,chapter 1 & 3 Scope and environment of financial management,Development of Financial Management,Early 20th century: Concentrated on reporting to outsiders.,Early 21st century: Insiders managing and controlling the firms financial operations.,At the turn of the twentieth century financial topics foc
2、used on the formation of new companies and their legal regulation and the process of raising funds in the capital markets. The companys secretary was in charge of raising funds and producing the annual reports, as well as the accounting function.,Business failures during the Great Depression of the
3、1930s helped change the focus of finance. Increased emphasis was placed on bankruptcy, liquidity management and avoidance of financial problems.,After World War the emphasis of corporate finance switched from financial accounting and external reporting to cost accounting and reporting and financial
4、analysis on behalf of the firms managers. That is, the perspective of finance changed from reporting only to outsiders to that of an insider charged with the management and control of the firms financial operations.,Capital budgeting became a major topic in finance. This led to an increased interest
5、 in related topics, most notably firm valuation. Interest in these topics grew and in turn spurred interest in security analysis, portfolio theory and capital structure theory.,Typical Finance Structure,Chief accountant is also called financial controller, whose responsibilities include financial re
6、porting to outsiders as well as cost and managerial accounting and financial analysis on behalf of the firms managers. Corporate treasurer is in charge of raising funds, managing liquidity and banking relationships and controlling risks.,Financial Goal of the Firm,Profit maximisation?,In microeconom
7、ics courses profit maximisation is frequently given as the financial goal of the firm. Profit maximisation functions largely as a theoretical goal.,Problems: UNCERTAINTY of returns TIMING of returns,Shareholder wealth maximisation?,Same as: Maximising firm value Maximising share values,It takes into
8、 account uncertainty or risk, time, and other factors that are important to the owners. But many things affect share prices.,Difficulty: The agency problem,Agency problem,The agency problem refers to the fact that a firms managers will not work to maximise benefits to the firms owners unless it is i
9、n the managers interest to do so. This problem is the result of a separation of the management and ownership of the firm.,Agency Costs,The costs, such as reduced share price, associated with potential conflict between managers and investors when these two groups are not the same.,In order to lessen
10、the agency problem, some companies have adopted practices such as issuing stock options (share options) to their executives.,Financial Decisions and Risk-return Relationships,Almost all financial decisions involve some sort of risk-return trade-off. The more risk the firm is willing to assume, the h
11、igher the expected return from a given course of action.,Risk and Returns,Why Prices Reflect Value,Efficient Markets,Markets in which the values of all assets and securities at any instant in time fully reflect all available information.,Assumption,Organisational Forms,Sole proprietorships Partnersh
12、ips Companies,Nature of the organisational forms,Sole proprietorship Owned by a single individual Absence of any formal legal business structure The owner maintains title to the assets and is personally responsible, generally without limitation, for the liabilities incurred. The proprietor is entitl
13、ed to the profits from the business but also absorb any losses.,Partnership The primary difference between a partnership and a sole proprietorship is that the partnership has more than one owner. Each partner is jointly and severally responsible for the liabilities incurred by the partnership.,Compa
14、ny A company may operate a business in its own right. That is, this entity functions separately and apart from its owners. The owners elect a board of directors, whose members in turn select individuals to serve as corporate officers, including the manager and the company secretary. The shareholders
15、 liability is generally limited to the amount of his or her investment in the company.,Limited company (Ltd) and proprietary limited company (Pty Ltd) Ltd companies are generally public companies whose shares may be listed on a stock exchange, ownership in such shares being transferable by public sa
16、le through the exchange. Pty Ltd companies are basically private entities, as the shares can only be transferred privately.,Comparison of Organisational forms,Organisation requirements and costs Liability of owners Continuity of business Transferability of ownership Management control Ease of capita
17、l raising Income taxes,The flow of funds,Savings deficit units Savings surplus units Financial markets facilitate transfers of funds from surplus to deficit units Direct flows of finds Indirect flows of funds,Direct transfer of funds,savers,firms,Types of securities,Treasury Bills and Treasury Bonds
18、 Corporate Bonds Preferred Shares Ordinary Shares,Risk?,High Returns?,Relationship?,Broking & investment banking,How do brokers / investment bankers help firms issue securities? Advising the firm Underwriting the issue Distributing the issue Enhancing Credibility,Indirect transfer of funds,financial
19、 intermediary,firms,savers,Components of financial markets,Primary and secondary markets Capital and money markets Foreign-exchange markets Derivatives markets Stock exchange markets,Primary and secondary markets,Primary markets Selling of new securities Funds raised by governments and businesses Se
20、condary markets Reselling of existing securities Adds marketability and liquidity to primary markets Reduces risk on primary issues Funds raised by existing security holders,Capital & money markets,Capital markets Markets in long-term financial instruments By convention: terms greater than one year
21、Long-term debt and equity markets Bonds, shares, leases, convertibles Money markets Markets in short-term financial instruments By convention: terms less than one year Treasury notes, certificates of deposit, commercial bills, promissory notes,Reviews,Introduce the history of financial management Un
22、derstand the financial goal of decision-making Understand the limitations of a goal of profit maximisation Introduce risk-return trade-off of decisions Introduce market efficiency Distinguish between the forms of business organisations Understand the financial market,End of Chapter 1,Chapter 4: Math
23、ematics of Finance,The Time Value of Money,Compounding and Discounting: Single sums,We know that receiving $1 today is worth more than $1 in the future. This is due to OPPORTUNITY COSTS. The opportunity cost of receiving $1 in the future is the interest we could have earned if we had received the $1
24、 sooner.,we can MEASURE this opportunity cost by:,Translate $1 today into its equivalent in the future (COMPOUNDING). Translate $1 in the future into its equivalent today (DISCOUNTING).,?,?,Note:,Its easiest to use your financial functions on your calculator to solve time value problems. However, yo
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