CHAPTER 1
The Goals and
Functions of
Financial Management

The Field of Finance

Accounting Provides Financial Data through

Income Statements

Balance Sheets

Statements or Cash Flows

The Financial Manager must
know how to interpret these
statements in order to generate
the best return possible in
the long run.

Forms of Organization

Sole Proprietorship:
Single person ownership.

Partnership: Second
form of organization.
Two or more owners.

Corporation: Owned by shareholders
with limited liability (their liability
exposure is generally no greater
that their initial investment)
because the corporation reports and pays
taxes on ist own income.

The meeting places for people,
corporations, and institutions that
either need or have money
to lend or invest.

Exist as a vast global network
of individuals and financial
institutions that may be lenders,
borrowers, or owners of public
companies worldwide.

Participants of Financial
Market also include

National, State and Local
Governments. Primarily
borrowers of funds for
highways, education, welfare,
etc.

Money Markets refer to
those markets dealing
with short term securities
that have a life of one year
or less.

Capital Markets: those
markets where securities
have a life of more than
one year.