L G 1 Define finance and the managerial finance function.
L G 2 Describe some goals that financial managers pursue, and link achievement of those objectives to the general goal of maximizing the wealth of the firm’s owners.
L G 3 Identify the primary activities of the financial manager.
L G 4 Explain the key principles that financial managers use when making business decisions.
Learning Goals (2 of 2)
L G 5 Describe the legal forms of business organization.
L G 6 Describe the nature of the principal–agent relationship between the owners and managers of a corporation, and explain how various corporate governance mechanisms attempt to manage agency problems.
1.1 Finance and the Firm (1 of 10)
• 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
▪ how they invest their savings
1.1 Finance and the Firm (2 of 10)
• What Is Finance?
– In a business context, finance involves:
▪ how firms raise money from investors
▪ how firms invest money in an attempt to earn a profit
▪ how firms decide whether to reinvest profits in the business or distribute them back to investors
– Managerial finance concerns the duties of the financial manager in a business