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This 2 page Class Notes was uploaded by Kali Muren on Tuesday January 26, 2016. The Class Notes belongs to FIN 326 at University of Missouri - Kansas City taught by David Nicol in Spring 2016. Since its upload, it has received 26 views. For similar materials see Financial Management 2 in Finance at University of Missouri - Kansas City.
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Date Created: 01/26/16
Finance 326 – January 19 , 2016 th C HAPTER 1 - O VERVIEW OF F INANCIAL MANAGEMENT Basic areas of finance: corporate finance = business finance, investments, financial institutions, and … Investments: work with financial assets such as stocks and bonds, value of financial assets, risk versus return, and asset allocation, (job opportunities: stock broker). Financial institutions: companies that specialize in financial matters. International finance: an area of specialization within each of the above areas discussed. Need to be familiar with exchange rates, political risk, languages, and customs of other countries. Why study finance? Marketing: budgets, marketing research, marketing financial products. Accounting: dual accounting and finance function, preparation of financial statements. (Where did all the money come from, and where did it go? Where should it go? Should I invest?) Management: strategic thinking, job performance, profitability. Personal finance: budgeting, retirement planning, college planning, day-to- day cash flow issues. Financial management decisions: what long-term investments or projects should the business take on? What is going to benefit the company the most? Financial manager positions: CFO, treasurer, controller. 3 major forms of business organization: Sole proprietorship: easiest to start, least regulated, single owner keeps all the profits & unlimited liability, equity capital limited to own person’s wealth, difficult to sell, taxed once as personal income, limited to the life of the owner. Partnership: general & limited. More capital available, relatively easy to start, income taxed once as personal income, unlimited liability, partnership dissolves when one dies or desires to sell, difficult to transfer ownership. Corporation: C-Corp, LLC (limited liability), & S-Corp (small business corporation). Limited liability, separation of ownership and management (could be good or bad), transfer of ownership is easy, easier to raise capital, unlimited life, double taxation (income taxed at corporate rate & dividends taxed at personal rate, while dividends are not tax deductible) What should be the goal of a corporation? Max profits? Min costs? Max market share? - Maximize the market value of the existing owner’s equity. - Maximize the current value per share of the company’s existing stock.
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