CHAPTER 1: INTRODUCTION TO CORPORATE FINANCE - Coggle Diagram
CHAPTER 1: INTRODUCTION TO CORPORATE FINANCE
Arises when the principal hires an agent to perform some services or the decision-making authority is delegated to the agent.
Primary agency relationships include between shareholders (the principal) and managers (the agent) and between debt-holders (the principal) and managers (the agent).
A conflict of interest that occurs when agents don't fully represent the best interests of principals.
ROLES OF A FINANCIAL MANAGER
Allocating the funds
To understand the capital markets
FINANCIAL MANAGEMENT DECISION
Capital Structure: Refers to the make up of a firm's capitalisation.
Working Capital Management: An accounting strategy with a focus on the maintenance of a sufficient balance between a company's current assets and liabilities.
Capital Budgeting: A process to determine which proposed fixed asset purchases it should accept, and which should be declined.
GOALS OF FINANCIAL MANAGEMENT
To help increase sales
Maximization of profits
To minimize risk
Maximization of share price
WHAT IS CORPORATE FINANCE?
Division of finance that deals with how corporations deal with funding sources, capital structuring, and investment decisions.
Primarily focused with maximizing shareholder value through long and short-term financial planning and the implementation of various strategies.
CONTROL OF CORPORATION
Election of Board of Directors
Replacement through takeover
FINANCIAL MARKET & CORPORATIONS
Market where securities are created; examples include initial public offering (IPO)
A market wherein the trading of securities is done. It consists of both equity as well as debt markets.
FORMS OF BUSINESS ORGANIZATION
Partnership: An association or relationship between two or more individuals, corporations, trusts, or partnerships that join together to carry on a trade or business.
Corporations: A legal entity that is separate and distinct from its owners.
Sole Proprietorships: An individual who owns the business and is personally responsible for its debts.