1 - 0 what is finance fields and jobs in finance forms of business organization responsibility of...

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What is financeFields and jobs in FinanceForms of business organizationResponsibility of financial staff

in a corporationGoals of the corporation

CHAPTER 1An Overview of Finance

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Finance is the study of the flow of moneyBorrowing and LendingFinancial institutions-the middle manFinancial instruments-standard contact of

borrowing/lendingFinancial markets

What is Finance

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Money and Capital MarketMarkets and institutions that provide short

and long term capital: Investment banks, banks, mutual funds, insurance companies, stockbrokers

Regulators: Fed, SEC (security and exchange commission)

Fields and jobs in Finance

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InvestmentsSecurity analysisPortfolio managementMarket analysis

Financial management (corporate finance)

Fields and jobs in Finance

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Sole proprietorshipPartnershipCorporation

Alternative Forms of Business Organization

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Advantages:Ease of formationSubject to few regulationsNo corporate income taxes

Disadvantages:Limited lifeUnlimited liabilityDifficult to raise capital

Sole Proprietorship

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A partnership has roughly the same advantages and disadvantages as a sole proprietorship.

Partnership

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Why corporation? disadvantages

Double taxationCost of set-up and report filingProfit sharing

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Unlimited life Easy transfer of ownership Limited liability: why?

Fairness and efficiency Ease of raising capital Capitalize future earnings into stock

value today

Advantages

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Investment and financing decisions Forecasting and planning Transactions in the financial markets Managing risk (insurance, hedging)

Responsibilities of the Financial Staff

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The primary goal is shareholder wealth maximization, which translates to maximizing stock price.

Goals of the Corporation