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Introduction to Corporate Finance


Submitted By hanzhimin
Words 1934
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Chapter 1
Introduction to Corporate Finance
Week 1

by Hee Soo Lee

Learning Goals
The basic types of financial management decisions and the role of the financial manager
The financial implications of the different forms of business organization The goal of financial management
The conflicts of interest that can arise between owners and managers The various types of financial markets


Chapter Structure
1.1 The Types of Firms
1.2 Ownership Versus Control of Corporations
1.3 The Stock Market


What is Corporate Finance?

Three important questions that are answered when you start your own business:
- What long-term investments should you take on? (business type, building, machinery, and equipment?)
- Where will you get the long-term financing to pay for the investment? (bring other owners or borrowing?)
- How will you manage the everyday financial activities of the firm? (collecting from customers and paying suppliers)

Corporate finance is the study of ways to answer these three questions Finance can be defined as the art and science of managing money
 Finance is concerned with the process, institutions, markets, and instruments involved in the transfer of money among individuals, businesses, and governments


Legal Forms of Business Organization
Three major forms
 Sole Proprietorship : business owned by a single individual  Partnership: business formed by two or more individuals or entities
 Corporation : business created as a distinct legal entity composed of one or more individuals or entities 


Sole Proprietorships
Business is owned and run by one person
Typically has few, if any, employees

Easy to create



Unlimited personal liability
Limited life

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