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Fin105 JTA-A
1st
Semester, SY 2011-2012
Aldo Tong
Financial Management
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Course Syllabus
atong@ateneo.edu
Consultation hours: by appointment
RemindersClass beadle
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http://www.groups.yahoo.com/group/jgsom_fin_tong
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NICKNAME FIN105 (Sec.)
Full Name
ID Number Course
BirthdayCellphone Number, Landline Number
Email address
High School
1) What grade do you plan to get for this course
2) What are you willing to do to get this grade.
3) What is investment?
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Forms of Business Organization
1. Sole Proprietorshipo an unincorporated business owned by
one individual
2. Partnershipo an unincorporated business owned by
two or more persons
3. Corporationo a legal entity created by a state,
separate and distinct from its ownersand managers
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Forms of Business Organization
SoleProprietorship
Partnership Corporation
Easy and inexpensive to form
Setting up and
accomplishing allrequirements canbecome complex
and time-
consuming
Few government operations
NO corporate income tax
Corporateearnings are
subject to double
taxation
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Forms of Business Organization
SoleProprietorship
Partnership Corporation
Difficult to obtain large sums ofcapital Easy to obtainadditional capital
Unlimited liability and limited lifeLimited liability
and unlimited life
-Difficult totransfer
ownership
Easytransferability of
ownership
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A O i f Fi i l
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An Overview of FinancialManagement
1. Money and Capital markets
2. Investments
3. Financial Management Decision making
How to raise capital
What to spend on
A O i f Fi i l
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An Overview of FinancialManagement
Trends Affecting Finance
BUSINESS ETHICSGLOBALIZATION
INFORMATION TECHNOLOGY
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Social Responsibility
Business should be actively concerned withthe welfare of society but this will entail cost
and might be disadvantageous
Business Ethics
A companys attitude and conduct toward itsemployees, customers, community and
stockholders
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Tasks of Financial Staff
1. Forecasting and planning2. Major investment and financing
decisions
3. Coordination and control4. Dealing with the financial markets5. Risk management
THE MAIN TASK IS TOMAXIMIZE THE VALUE OF THE
FIRM!
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Goal of the Corporation
Stockholder Wealth Maximization Primary goal for management decisions
Considers the risk and timing associatedwith expected earnings per share inorder to maximize the price of the firms
common stock
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The Agency Problem
A potential conflict of interests between
the agent (manager) and (1) the outside
stockholders or (2) the creditors
(debtholders)
This problem can be remedied by motivating
the managers to act in the best
interests of the stockholders.
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Shareholders versus Managers
Managers are naturally inclined to act intheir own best interests.
But the following factors affect
managerial behavior: Managerial compensation plans Direct intervention by shareholders The threat of firing The threat of takeover
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Shareholders versus Creditors
Shareholders (through managers) couldtake actions to maximize stock price thatare detrimental to creditors.
In the long run, such actions will raisethe cost of debt and ultimately lowerstock price.
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Financial Management
The intrinsic priceof a firms stockdepends on the cash flows paid to
shareholders, the timing of the cash
flows, and their riskiness. The leveland riskiness of cash flows are affectedby the financial environment as well
as by investment, financing, anddividend policy decisions made byfinancial managers.
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Basic Valuation Model
To estimate an assets value, oneestimates the cash flow for each period t
(CFt), the life of the asset (n), and theappropriate discount rate (k)
Throughout the course, we discuss howto estimate the inputs and how financial
management is used to improve them
n
1t t
t
n
n
2
2
1
1
.k)(1
CF
k)(1
CF
k)(1
CF
k)(1
CFValue
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