Lecture 1 Introdcution
MBA Program
The Role of Financial
Management
Lecture 1
Dr Svetlana Sapuric
1
MBA Program
The Role of
Financial Management
•
•
•
•
What is Financial Management?
The Goal of the Firm
Agency Relationships
External Factors and stock price
Dr Svetlana Sapuric
2
MBA Program
What is Financial
Management?
Concerns the acquisition, financing, and management of assets with some overall goal in mind.
Dr Svetlana Sapuric
3
MBA Program
Investment Decisions
Most important the three decisions:
• What is the optimal firm size?
• What specific assets should be acquired?
• What assets (if any) should be reduced or eliminated? Dr Svetlana Sapuric
4
MBA Program
Financing Decisions
Determine how the assets (LHS of balance sheet) will be financed (RHS of balance sheet). •
•
•
•
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?
Dr Svetlana Sapuric
5
MBA Program
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. Dr Svetlana Sapuric
6
MBA Program
The Financial Manager’s
Responsibilities
•
•
•
•
Forecasting and planning
Major investment and financing decisions
Coordination and control
Dealing with financial markets
Dr Svetlana Sapuric
7
MBA Program
What is the Goal of the Firm?
Maximization of Shareholder
Wealth!
Value creation occurs when we maximize the share price for current shareholders.
Dr Svetlana Sapuric
8
MBA Program
Managerial Actions to
Maximize Stockholder Wealth
• Capital Structure Decisions
• Capital Budgeting Decisions
• Dividend Policy Decisions
Dr Svetlana Sapuric
9
MBA Program
Agency Relationships
• An agency relationship exists whenever a principal hires an agent to act on their behalf. • Within corporations, agency relationships exist between:
–
The Role of Financial
Management
Lecture 1
Dr Svetlana Sapuric
1
MBA Program
The Role of
Financial Management
•
•
•
•
What is Financial Management?
The Goal of the Firm
Agency Relationships
External Factors and stock price
Dr Svetlana Sapuric
2
MBA Program
What is Financial
Management?
Concerns the acquisition, financing, and management of assets with some overall goal in mind.
Dr Svetlana Sapuric
3
MBA Program
Investment Decisions
Most important the three decisions:
• What is the optimal firm size?
• What specific assets should be acquired?
• What assets (if any) should be reduced or eliminated? Dr Svetlana Sapuric
4
MBA Program
Financing Decisions
Determine how the assets (LHS of balance sheet) will be financed (RHS of balance sheet). •
•
•
•
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?
Dr Svetlana Sapuric
5
MBA Program
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. Dr Svetlana Sapuric
6
MBA Program
The Financial Manager’s
Responsibilities
•
•
•
•
Forecasting and planning
Major investment and financing decisions
Coordination and control
Dealing with financial markets
Dr Svetlana Sapuric
7
MBA Program
What is the Goal of the Firm?
Maximization of Shareholder
Wealth!
Value creation occurs when we maximize the share price for current shareholders.
Dr Svetlana Sapuric
8
MBA Program
Managerial Actions to
Maximize Stockholder Wealth
• Capital Structure Decisions
• Capital Budgeting Decisions
• Dividend Policy Decisions
Dr Svetlana Sapuric
9
MBA Program
Agency Relationships
• An agency relationship exists whenever a principal hires an agent to act on their behalf. • Within corporations, agency relationships exist between:
–