25300 Lecture Notes - Lecture 1: Market Capitalization, International Finance, Capital Budgeting
Document Summary
Fundamentals of finance: basic areas of finance. Financial institutions, international finance: goal of financial management. Wealth is measured in terms of cash flow, not profit. Success = market capitalisation (share prices x no. of shares: basic types of financial management decisions. Determining value of lt asset (choose assets that create sw) Investment (capital budgeting decision most important) Financing (capital structure decision equity vs. debt) Contractual claim debt vs. residual claim equity. Credit sales be allowed: ethical dimensions in financial decision making, forms of business, principal and agent law. Management are agents for the owners (potential conflict) Ease of transfer of ownership, limited liability for shareholders. Company (approx 2000 listed on asx easy to raise capital) When managers don"t act in best interest of sw = agency problem. E. g. managers retain poorly performing assets when new managers could run them more efficiently. Duties of agent: act in the principles best interest: three factors of any financial decision.
