chapter 1
Financial management encompasses various aspects, including the determination of intrinsic values, stock prices, and executive compensation. Intrinsic value represents the true worth of a stock based on accurate risk and return data, while the market price is influenced by the marginal investor'
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An overview of financial management Intrinsic values, stock prices,
and executive compensation Equilibrium:
The situation in which the actual market
price equals the intrinsic value, so investor
are different between buyying or selling a
stock Marginal Investor:
An investor whose veiws determine the
actual stock price Maret Price:
The stock value based on perceived but
possibly incorrect information as see by
the marginal investor Intrinsic Value:
An estimate of a stock's "true" value base
on accurate risk and return data Forms of business organization Limited Liability Partnership (LLP):
similar to LLC but used professionally
in accounting, law, architecture Limited Liability Company (LLC):
an organization that hybrid between
a partnership and a corporatin Corporation:
a legal entity created
by a state, separate and
distinct from its owners
and managers C corporations:
more than 75
stockholders S corporations:
no more than
75 stockholders Partnership:
an unincorporated owned
by two or more people Proprietorship:
an unincorporated business
owned by one individual Business ethics A Company's attitude and condutct
toward its employees, customers,
communityy, and stockholders Stock prices and shareholder value Primary goal for managers:
maximize the long-run of
the firm's common stock What is financial? Corporate Finance, Capital
Marets, and Investments Investment relates to decision
concerning stock and bond Market analysis
Portfolio theory
Security analysis
Capital market relates
to interest rates, stock and
bond prices Corporate finance = Financial
management, focus on assets, capital,
and maximizing value Finance versus economics
and accounting Accountants provided information
size of those cash flows Economists developed
an asset's value based
on the future cash flows
