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York University (12,350)
ADMS 3530 (23)
Chapter 1

ADMS 3530 Chapter 1: Chapter 1 Textbook Notes

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York University
Administrative Studies
ADMS 3530

1. Financial Manager has to determine? 1. (1) Capital Budgeting Decision/ Investment decision: what capital investment projects to invest in and how much to spend on each project. Has to place value on uncertain future cash flows (2) Financing Decision: how to raise the money the firm needs to pay for those assets FINANCIAL MANAGER: anyone responsible for significant corporate investment or financing decision 2. Tangible vs intangible assets 2. (1) Tangible: Physical assets (a) Current assets (items that can be turned into cash at end of year) ex. inventory (b) Fixed assets (cannot be sold at any point in business) ex. machinery, equipment (2) Intangible:Nonphysical ex. patents, R&D 3. To make an Investment Decision financial 3. (1) Amounts of benefits manager has to account for: (2) Timing of the benefits (3) Risks associated with the future benefits produced by the asset 4. A project is attractive if… 4. It’s value is greater than its cost 5. For the financing decision the financial manager 5. (1) Internally generated funds can use: (2) Externally generated funds 6. 2 broad categories of external financing: 6. (1) Debt financing: lenders that have to repaid (2) Equity financing: investors put up cash in exchange for future profit or promise to pay back investors’ can plus fixed rate of interest 7. Choice b/w 2 external sources is called the… 7. Capital Structure Decision 8. Capital refers to… 8. Firm’s source of long-term financing 9. Real vs financial assets 9. (1) Real assets: used to produce firm’s products and services (tangible and intangible assets) (2) Financial assets: Used to finance its investment in real assets. Ex. share of stock, bank loan 10. Securities 10. Shares of stocks and other financial assets that can be purchased and traded by investors 11. Corporation Definition 11. A business (separate legal entity) owned by shareholders/stockholders who are not personally liable for business’ liabilities (LIMITED LIABILITY) 12. Is there a separation of ownership and 12. Yes. Shareholders are owners and management in corporations? management is the board of directors (elected by shareholders). 13. Selling shares is easier in private or public 13. Public because can use stock market. Private corporations? Who can sell them? is more time consuming and subject to legal restrictions. Sold by shareholders 14. Sarbanes-Oxley Act 14. Strict reforms to improve financial disclosure from corporations to protect investors 15. Advantages of a corporation 15. (a) limited liability (b) ease ownership and management can be separated (c) financial flexibility of publicly traded shares 16. Disadvantages of a corporation 16. (a) Double taxation (b) costly in both time and money (c) abide by rules of stock exchanges, accounting standards and securities laws (d) must share info w/ public 17. Can corporations sue or be sued? 17. Yes 18. Different forms of business organizations 18. (1) Sole Proprietorship: Owned and operated by one individual that is personally liable. Easy to form and dissolve. Only taxed once. (2) Partnership: Owned by 2 or more people. Only taxed once. General partners- unlimited liability, limited partners- limited liability (3) Hybrid forms: have characteristics of corporations and partnerships 19. What broad job categories are under the Chief 19. (1) Treasurer: is responsible for cash Financial Officer? managemen
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