Corporate Finance Notes
Chapter One
Basic Areas of Finance:
1. Corporate Finance = Business Finance
2. Investments
a. Work with financial assets such as stocks and bonds.
b. Value of financial assets, risk verses return and asset allocation.
c. Job opportunities.
3. Financial Institutions
a. Companies that specialize in financial matters.
i. Banks – Credit unions, savings, and loans. ii. Insurance Companies iii. Brokerage Firms
b. Job Opportunities.
4. International Finance
a. An area of specialization within each of the areas discussed so far.
b. May allow you to work in other countries or at least travel on a regular basis.
c. Need to be familiar with exchange rates and political risk.
d. Beneficial to understand the customs of other countries; speaking a foreign language.
Business Finance: (Corporate Finance)
Some important questions that are answered using finance:
What long-term investments should be taken on by the firm?
Where will we (the firm) get the long-term financing to pay for the investments?
How will we manage the everyday financial activities of the firm?
Financial Manager:
They try to answer some or all of the business finance questions.
The top financial manager within a firm is usually the Chief Financial Officer (CFO)
Treasurer – oversees cash management, credit management, etc.
Controller – oversees taxes, cost accounting, etc.
** Corporate Organization Chart, Figure 1.1**
Goals of Financial Management:
What should the goal of a corporation be?
Getting money back to shareholders, investors, etc. Making a profit is important.
Minimize costs.
Maximize market share
Maximize the current value per share of the company’s existing stock.
Maximize the market value of the existing owners’ equity.
Does this mean we should do anything and everything to maximize owner wealth?
Outsourcing? Off-shoring? Corporate support of charities? Enron?
Chapter Two – Accounting Review
The Two Financial Statements:
Balance Sheet (“as of”)
Income Statement (“for”)
Balance Sheet:
Assets =
Basic Areas of Finance:
1. Corporate Finance = Business Finance
2. Investments
a. Work with financial assets such as stocks and bonds.
b. Value of financial assets, risk verses return and asset allocation.
c. Job opportunities.
3. Financial Institutions
a. Companies that specialize in financial matters.
i. Banks – Credit unions, savings, and loans. ii. Insurance Companies iii. Brokerage Firms
b. Job Opportunities.
4. International Finance
a. An area of specialization within each of the areas discussed so far.
b. May allow you to work in other countries or at least travel on a regular basis.
c. Need to be familiar with exchange rates and political risk.
d. Beneficial to understand the customs of other countries; speaking a foreign language.
Business Finance: (Corporate Finance)
Some important questions that are answered using finance:
What long-term investments should be taken on by the firm?
Where will we (the firm) get the long-term financing to pay for the investments?
How will we manage the everyday financial activities of the firm?
Financial Manager:
They try to answer some or all of the business finance questions.
The top financial manager within a firm is usually the Chief Financial Officer (CFO)
Treasurer – oversees cash management, credit management, etc.
Controller – oversees taxes, cost accounting, etc.
** Corporate Organization Chart, Figure 1.1**
Goals of Financial Management:
What should the goal of a corporation be?
Getting money back to shareholders, investors, etc. Making a profit is important.
Minimize costs.
Maximize market share
Maximize the current value per share of the company’s existing stock.
Maximize the market value of the existing owners’ equity.
Does this mean we should do anything and everything to maximize owner wealth?
Outsourcing? Off-shoring? Corporate support of charities? Enron?
Chapter Two – Accounting Review
The Two Financial Statements:
Balance Sheet (“as of”)
Income Statement (“for”)
Balance Sheet:
Assets =