Corporate Finance

1
Corporate Finance

• Lecture 1

2
Topics

• Change of schedule
• Fridays
• from 1830 1950 to 1100 1220
• Practical information about this course
• The firm and the financial managers

3
About the Course

• Objective to introduce basic principles of
  finance and practical tools for financial
  decisions.
• Text book Corporate Finance, Ross, Westerfield
  and Jaffe, 7th edition
• Syllabus and notes online
• http//docentes.fe.unl.pt/qdai/teaching/master/co
  rpfin2009.html
• Office hour Tuesday 1600 to 1700, Room 352
• Email qinglei.dai_at_fe.unl.pt

4
Evaluation

• Class participation (10)
• Exercises and Case studies (40)
• 2 cases and three online exercises
• Moodle password finance
• Case study group
• 3-4 students per group.
• The groups have to be registered by April 14 with
  TA. Anyone who fails to register has to do the
  case study ALONE.
• Final exam (50)
• May 19

5
The firm and the financial managers

• The firm
• What do we learn from this course?
• The balance sheet model of corporate finance
• The role of a financial manager
• What is a financial manager
• The role

6
Organization Chart
7
The Role of The Financial Manager
Firm's
Financial
operations
Investors
Manager
Real assets
8
Goals of the firm

• Shareholders desire wealth maximization
• Do managers maximize shareholder wealth?
• Agency Problems

9
Goals of the firm

• Agency Problem Solutions
• 1 - Compensation plans
• 2 - Board of Directors
• 3 - Takeovers
• 4 - Specialist Monitoring
• 5 - Auditors

10
The Firm

• Purpose of the firm value creation
• Does value maximization justify unethical
  behavior
• Enron
• More suggestions?
• Two aspects of corporate finance
• Raise funding
• Investment
• Balance sheet model of corporate finance

11
The Balance-Sheet
12
The Balance-Sheet
What long-term investments should the firm engage
in?
13
The Role of The Financial Manager

• Capital Budgeting Decision
• also called the Investment Decision

Intangible Assets Coca-Cola brand name
Tangible Assets Portugal Telecom _at_ 3,585 million
Euros
14
(No Transcript)
15
The Balance-Sheet
How can the firm raise the money for the required
investments? 1. Financing Decision 2. Capital
Structure
16
The Balance-Sheet
Net working capital management