FINC311 Chapter Notes - Chapter 1-5: Retained Earnings, Inventory Turnover, Operating Cash Flow
16 Oct 2018
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Corporate finance: corporate finance = business finance, capital budgeting what investments do you make, capital structure how do you finance these investments, working capital management how will you manage daily financial activities. Maximize share holder value: this eliminates the failings of other potential goals. Assure all decisions improve an/or protect shareholder value. Agency relationship: principle hires an agent to represent its interests; stockholders hire managers to run the company. Agency problem: conflict of interest between principal and agent. Incentives can be used to align management and stockholders interests. Incentives need to be carefully structured to insure that they achieve their goal. Corporate control: threat of a takeover may result in better management. Chapter two: financial statements, taxes and cash flows. Balance sheet: assets, liabilities, and stockholders equity as of a specific date. Income statement: measures performance, includes revenues and expenses over a period of time.
