Part 1 of the Book. Overview of Corporate Finance
Chapter Title: Introduction to Corporate Finance Word Bank Word Definition/Example Chapter Work Completed Handout Word Bank & Summaries Book Exercises Khan Academy Plickers Video Introduction
FIN 300 - The Goal of Financial Management - Ryerson University - YouTube (up to 2.40) Where do you go to get money? What is another name for debt?
What do you do with the money you raised?
What will bond holders get in return for giving you money?
What will equity holders get in return for their investment?
1.1 Corporate Finance and the Financial Manager
In this section we study the role of the financial manager and define corporate finance. We see that
the financial manager is concerned with long term (capital budgeting, capital financing) and short
term (working capital management) issues. (Corporate Finance)
According to the author, corporate finance tries to answer three questions. What are they? Use your
own words. Top of page 2 will help.
Financial managers is usually asscoiated with a top officer of the firm, such as a vice president of finance (Financial Manager Decisions)
What is capital budgeting and what is the aim of capital budgeting? Bottom of page 2 will help.
Capital budgeting is the process a business undertakes to evaluate potential major projects or
investments. It is the process of planning and managing a firm’s long term investment
Give an example of what would be considered capital budgeting and one example of what would not be. Page 3 will help.
The author notes that when a business decision is being evaluated (capital budgeting) you must
consider three things. What are they? Middle of page 3 will help.
Evaluting size, timing, and risk of future cash flows
What is capital structure? Use the terms ‘long term financing’, ‘debt’ and ‘equity’ in your answer. Bottom of page 3 will help.
A firm’s capital structure is the specific mixture of long-term debt and equity the firm uses to finance its operation.
What is working capital? Page 4 will help.
Working capital refers to a firms’s short term assets, such as inventory, and its short -term liabilities,
such as money owned to suppliers
What are some of the questions that should be answered in relation to working capital management?
Most Important Points to Remember