MAF101 Lecture Notes - Lecture 1: Capital Budgeting, Sole Proprietorship, Tax Bracket

• School: Deakin University
• Department: Business and Law
• Course: MAF101
• Professor: John Guo

Document Summary

Finance is the art and science to manage money". When contemplating any business decision, managers should ask: Does this action create value for the company"s shareholders?". By taking actions that generate benefits in excess of costs, companies generate wealth for their investors. The ultimate corporate objective is to maximize shareholders wealth, or share price. A company"s share price reflects the timing, magnitude and risk of the cash flows that investors expect a company to generate over time. Market capitalization = share price # of outstanding shares. Focus on other stakeholders, such as employees, customers and community as doing so provides long-term benefits to shareholders and is in line with the primary goal of maximizing shareholder wealth. Involves selecting the best projects in which to invest the resources of the company, based on each projects perceived risk and expected return. Decide to purchase real assets" (can be used to produce goods & services) Real assets may be tangible or intangible.