Management and Organizational Studies 3370A/B Lecture Notes - Lecture 6: Cash Flow, Senior Debt, Financial Audit

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3370A/B
• Professor: Maria Ferraro

Document Summary

Finance: the science or study of the management of funds. The goal of the firm: the goal of the firm is to create value for the firms shareholders. Good/bad financial decisions will increase/decrease stock price. Role of management: serves as an arbitrator and moderator between conflicting interest groups or stake holders and objectives. Creditors, managers, employees and customers hold contractual claims against the company. Role of finance in business: (basis issues addressed by the study of finance) How should the firm raise money to fund these investments. How to manage cash flows arising from day to day transactions. Cash flow is what matters: accounting profits are not equal to cash flows. It is possible for a firm to generate accounting profits but not have cash or to generate cash flows but not report accounting profits on the books. (cash flow, and not profits determine the value of business) A dollar received today is worth more than a dollar tomorrow.