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Lecture 1

FIN 357 Lecture Notes - Lecture 1: Sole Proprietorship, Capital Structure, Limited Liability CompanyPremium

1 pages97 viewsSpring 2018

Department
Finance
Course Code
FIN 357
Professor
M Poloskey
Lecture
1

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Finance Lecture 1
January 18, 2018
What is finance?
- Decisions about money; how it is raised and used
History of Finance?
- Major theories established in last 70 years
- Theory of finance originated in the 1950s
3 Key Financial Decisions?
1. Capital Budgeting: long-term, high-dollar assets (plant, property, and equipment)
2. Capital Structure: How to pay for assets
3. Working Capital: Short-term assets and obligations
Financial Managers?
CFO
Treasurer Controller
Basic Forms of Business?
Normal
Hybrid
Sole Proprietorship
LLP: Limited Liability Partnership
Partnership
LLC: Limited Liability Company
Corporation
PC: Professional Company
Goal of Financial Management? To increase shareholder wealth
Agency Problem? Conflict of interest between principal and agent
Ex: Stockholder (principal) hire a manager (agent) to run the company
Management Goals?
- May be different than shareholder goals
- Increase growth and size of company
How to Manage Managers?
- Give the right incentives
o Compensation
o Want to keep their jobs
o Oversight by board of directors
o Oversight by large stockholders
o Prevent potential takeover by firm
o Legal and regulatory environment
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