1_introduction_to_financial_management.pptVIP

Why Study Finance? Chapter 1 Introduction to Financial Management Learning Outline/Topic covered Follow this learning outline as you read and study this chapter. Page 1 What is the role of financial management? What is the goal of financial management? What is financial management? 1. What long-term investments should you take on? 2. Where will you get the long-term financing to pay for your investment? 3. How will you manage your day-to-day financial activities such ad collecting from customers and paying suppliers? What is Financial Management? Concerns the acquisition, financing, and management of assets with some overall goal in mind. Investment Decisions What is the optimal firm size? What specific assets should be acquired? What assets (if any) should be reduced or eliminated? This is the capital budgeting decision Part 5 Financing Decisions What is the best type of financing? What is the best financing mix? What is the best dividend policy? How will the funds be physically acquired? We call this the financing decision. Part 6, Part 7 Asset Management Decisions How do we manage existing assets efficiently? Financial Manager has varying degrees of operating responsibility over assets. Greater emphasis on current asset management than fixed asset management. These decisions involve short-term finance and concern net working capital. Part 4 Role of The Financial Manager Income statement The income statement, often called the statement of income or statement of earnings, is the report that measures the success of enterprise operations for a given period of time. Income statement Sales Cost of goods sold Depreciation Earnings before interest and taxes Interest paid Taxable income Taxes(34%) Net income Dividends Addition to retained earnings From the stockholder’s point of view, what is a good financial management decision? Profit Maximization Earnings per Share Maximization (Earnings per share=EAT/the number of common shares outstandin