An overview of financial management

Finance versus economics
and accounting

Economists developed
an asset's value based
on the future cash flows

Accountants provided information
size of those cash flows

Corporate Finance, Capital
Marets, and Investments

Corporate finance = Financial
management, focus on assets, capital,
and maximizing value

Capital market relates
to interest rates, stock and
bond prices

Investment relates to decision
concerning stock and bond

Security analysis

Portfolio theory

Market analysis

Primary goal for managers:
maximize the long-run of
the firm's common stock

A Company's attitude and condutct
toward its employees, customers,
communityy, and stockholders

Proprietorship:
an unincorporated business
owned by one individual

Partnership:
an unincorporated owned
by two or more people

Corporation:
a legal entity created
by a state, separate and
distinct from its owners
and managers

S corporations:
no more than
75 stockholders

C corporations:
more than 75
stockholders

Limited Liability Company (LLC):
an organization that hybrid between
a partnership and a corporatin

Limited Liability Partnership (LLP):
similar to LLC but used professionally
in accounting, law, architecture

Intrinsic Value:
An estimate of a stock's "true" value base
on accurate risk and return data

Maret Price:
The stock value based on perceived but
possibly incorrect information as see by
the marginal investor

Marginal Investor:
An investor whose veiws determine the
actual stock price

Equilibrium:
The situation in which the actual market
price equals the intrinsic value, so investor
are different between buyying or selling a
stock