Allocation of capital
Secondary market
Primary market
Structure and fuctions
Capital markets
Markets that have a life of more than a year
Money Markets
Deals with short-term securities
Social responsability and ethical behavior
Insider trading
Occurs when someone uses information not available to profit
Sarbanes-Oxley Act
Control corrupt corporate behavior
Forms of organization
Corporation
Its a legal entity unto itself
Subchapter S corporation
Articles of incorporation
Partnership
Two or more owners
Sole propertioship
Represents single-person ownership and offers simplicity at decision making
The immpact of the internet
The rapid expantion of the internet allowed the creation of new business models and companies
Modern issues in finance
Desinflation
A slowing down of prices increases
Inflation
Increase of prices
Capital structure theory
The study of the relative importance of debt and equity
THE GOALS AND FUNCTIONS OF FINANCIAL MANAGEMENT
Format of the text
Introduction
Examines the goals and objectives of the financial management
Working capital management
Techniques for managing the dhort-term assets ans liabilities are examined
The capital budgeting process
The decision on capital outlays
The role of the financial markets
Corporate financial markets
Where corporations such as Nike and Ford raise funds
Public financial markets
Borrowers of funds for education, welfare,etc
Financial markets
Meeting place for corporations that either need money or have money to invest
Goals of financial management
Maximizing shareholder wealth
Achieving the highest value
A valuation Approach
Earnings valued by the investor
Corporate governance
The corporation is governed by the board of directors, led by de CEO
Institutional investors
They have the ability to vote large bloscks of shares for the election of the board directors
Agency theory
Examines the relatioship between the owners and the manegers of the firm
Functions of financial management
Aloccate funds to current and fixed assets
Obtain the best financing alternatives
Develop an dividend policy
Risk management and the financial crisis
Credid defalut swaps (CDS)
Insurance against borrowers defaulting on their loan
Risk managment
Allows the extantion of credit to borrowers who has high-risk profile
Evolution of the field of finance
Real capital
Long-term plan and equipment
Financial capital
Money, credit
The field of finance
Accounting
Provides finance data through the statements
Economics
Provides a structure for decision making
