



McGraw-Hill/Irwin
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Key Concepts and Skills
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


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

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
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


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 
!
1-2
Chapter Outline
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"
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#$
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%&"

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Controller – oversees taxes, cost accounting,
financial accounting and data processing
1-5
Financial Management
Decisions
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
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What long-term investments or projects
should the business take on?
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/0 (
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Should we use debt or equity?
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How should we pay for our assets?
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Cash Dividend or Share Repurchase
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1!
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How do we manage the day-to-day
finances of the firm?
1-6
Forms of Business
Organization
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%2)
–

0 
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Limited to life of
owner
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Equity capital
limited to owner’s
personal wealth
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Unlimited liability
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Difficult to sell
ownership interest
1-8
Partnership
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' 
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Two or more
owners
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More capital
available
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Relatively easy to
start
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Income taxed once
as personal income
•

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Easier to raise
capital
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0 
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Separation of
ownership and
management
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Double taxation
(income taxed at
the corporate rate
and then dividends
taxed at the
personal rate)
1-10
Goal of Financial
Management
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1
3
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Maximize profit?
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Minimize costs?
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Maximize market price per share?
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Maximize the current value of the company’s

and stockholder interests
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The incentives need to be structured carefully to
make sure that they achieve their goal
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
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The threat of a takeover may result in better
management
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$!
1-13
Work the Web Example
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% 
 

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$4
77
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!
8
9
1-14
Financial Markets
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( 
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( 7!


! 
3 
3
•
)
3
•

8!
3
•
)
 -778
".3
1-17
End of Chapter
1-18