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FIN 3715 (17)
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Chapter 1

Chapter 1 Book Notes

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Department
Finance
Course
FIN 3715
Professor
All Professors
Semester
Fall

Description
Chapter 1 Introduction to Corporate Finance 11Corporate Finance and Financial Manager What is Corporate FinanceCorporate finance is the study of ways to answer these three questions when opening a businessoWhat longterm investments should you take on That is what lines of business will you be in and what sorts of buildings machinery and equipment will you needoWhere will you get the longterm financing to pay for your investment Will you bring in other owners or will you borrow the moneyoHow will you manage your everyday financial activities such as collecting from customers and paying suppliersThe Financial ManagerThe corporation employs managers to represent the owners interests and make decisions on their behalf In a large corporation the financial manager would be in charge of answering the three questions we raised in the preceding section Their function is usually associated with a top officer of the firm such as the vice president of finance or some other chief financial officer CFO Figure 11 page 3Financial Management Decisions The financial manager must be concerned with three basic types of questions Capital Budgeting The first question concerns the firms longterm investmentsCapital budgeting is the process of planning and managing a firms longterm investments The financial manager tries to identify investment opportunities that are worth more to the firm than they cost to acquire oThis means that the value of the cash flow generated by an asset exceeds the cost of that asset
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