FINC2011 Lecture Notes - Lecture 1: Financial Risk Management, Cash Flow, Real Interest Rate
Document Summary
Chapter 1: goals and governance of the firm. In this case, the corporation is reinvesting on behalf of its existing shareholders. No new shares are issued: the decision to pay dividends or repurchase shares is called the payout decision, to determine overall market capitalisation/market cap = price of shares x number of shares on market. 1. 2 the role of the financial manager and the opportunity cost of capital. The flow of cash between financial markets and the firm(cid:495)s operations: Fir(cid:373)"s operatio(cid:374)s (a bundle of real assets) (2) (3) Investment opportunity (financial asset) (pay dividends) (shareholders invest for themselves: the firm can either keep and reinvest the cash or return it to investors. They can do that on their own, provided they have free access to competitive financial markets. They can also choose risk of investments: there is thus only one way that a financial manager can help a stockholder: by increasing their wealth.
