Professional Documents
Culture Documents
The Role of
Managerial
Finance
Learning Goals
LG1 Define finance and the managerial finance function.
LG2 Describe the legal forms of business organization.
LG3 Describe the goal of the firm, and explain why
maximizing the value of the firm is an appropriate
goal for a business.
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What is Finance?
Finance can be defined as the science and art of managing
money.
At the personal level, finance is concerned with
individuals decisions about how much of their earnings
they spend, how much they save, and how they invest their
savings.
In a business context, finance involves the same types of
decisions: how firms raise money from investors, how
firms invest money in an attempt to earn a profit, and how
they decide whether to reinvest profits in the business or
distribute them back to investors.
2012 Pearson Prentice Hall. All rights
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Career Opportunities in
Finance: Financial Services
Financial Services is the area of finance concerned with
the design and delivery of advice and financial products
to individuals, businesses, and governments.
Career opportunities include banking, personal financial
planning, investments, real estate, and insurance.
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Career Opportunities in
Finance: Managerial Finance
Managerial finance is concerned with the duties of the
financial manager working in a business.
Financial managers administer the financial affairs of all
types of businessesprivate and public, large and small,
profit-seeking and not-for-profit.
They perform such varied tasks as developing a financial
plan or budget, extending credit to customers, evaluating
proposed large expenditures, and raising money to fund
the firms operations.
2012 Pearson Prentice Hall. All rights
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Focus on Practice
Professional Certifications in Finance:
Chartered Financial Analyst (CFA) Offered by the CFA
Institute, the CFA program is a graduate-level course of study
focused primarily on the investments side of finance.
Certified Treasury Professional (CTP) The CTP program
requires students to pass a single exam that is focused on the
knowledge and skills needed for those working in a corporate
treasury department.
Certified Financial Planner (CFP) To obtain CFP status,
students must pass a ten-hour exam covering a wide range of
topics related to personal financial planning.
2012 Pearson Prentice Hall. All rights
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Matter of Fact
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Profit maximization may not lead to the highest possible share price for at least three reasons:
1.
2.
3.
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Focus on Ethics
Will Google Live Up to Its Motto?
In January 2010, Google announced that the Gmail accounts of
Chinese human-rights activists and a number of technology,
financial, and defense companies had been hacked.
The company threatened to pull out of China unless an
agreement on uncensored search results could be reached.
Is the goal of maximization of shareholder wealth necessarily
ethical or unethical?
How can Google justify its actions in the short run to its long
run investors?
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Costs
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$100,000
(80,000)
$ 20,000
Cash basis
$
(80,000)
$(80,000)
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Figure 1.3
Financial Activities
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Matter of FactForbes.com
CEO Performance vs. Pay
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LG2
LG3
Describe the goal of the firm, and explain why maximizing the
value of the firm is an appropriate goal for a business.
The goal of the firm is maximize its value, and therefore the wealth of
its shareholders. Maximizing the value of the firm means running the
business in the interest of those who own itthe shareholders.
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LG5
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Chapter Resources on
MyFinanceLab
Chapter Cases
Group Exercises
Critical Thinking Problems
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