FIN 301 - Introduction Dr. Menahem Rosenberg November 29, 2018 FIN 301 - Introduction Dr. Menahem Rosenberg

Forms of Business Operation Sole Proprietorship a firm owned by an individual or family the assets and liabilities are the personal assets and liabilities of the proprietor unlimited liability low administrative costs November 29, 2018 FIN 301 - Introduction Dr. Menahem Rosenberg

Forms of Business Operation Partnership A firm with ³ 2 owners sharing the equity. A partnership agreement usually stipulates how decisions and profits (losses) are shared. All partners have unlimited liability. November 29, 2018 FIN 301 - Introduction Dr. Menahem Rosenberg

Forms of Business Operation Corporation a legal entity, distinct from its ownership may own property, borrow, sue, be sued, and enter into legal contracts limited liability (corporate veil may be lifted) pays corporate taxes, resulting in double taxation of owner (not sub-chapter S Corp.) November 29, 2018 FIN 301 - Introduction Dr. Menahem Rosenberg

The Role of The Financial Manager (2) Cash invested in firm (2) (1) Cash raised from investors (1) (4a) Cash reinvested (4a) Financial Firm's Financial managers operations markets (3) Cash generated by operations (3) (4b) Cash returned to investors (4b) November 29, 2018 FIN 301 - Introduction Dr. Menahem Rosenberg 6 6 6 10 11 6

The Role of The Financial Manager Investment Decisions “Capital Budgeting” Buy real assets that are worth more than they cost Financing Decisions Source of Funds “Capital Markets” Capital Structure Money Markets November 29, 2018 FIN 301 - Introduction Dr. Menahem Rosenberg 5 5 5 6 5 5

Separation of Ownership and Management Shareholders elect directors, who appoint management Management goal: Maximize shareholder wealth An agency conflict of interest between shareholders and managers November 29, 2018 FIN 301 - Introduction Dr. Menahem Rosenberg

The Flow of Funds Diagram November 29, 2018 FIN 301 - Introduction Dr. Menahem Rosenberg

Six Key Financial Functions: Transferring Resources Across Time & Space Managing Risk Clearing and Settling Payments Pooling Resources and Subdividing Shares Providing Information November 29, 2018 FIN 301 - Introduction Dr. Menahem Rosenberg

Types of Financial Markets: Money markets Capital markets Primary markets Secondary markets November 29, 2018 FIN 301 - Introduction Dr. Menahem Rosenberg

Types of Financial Assets: Debt Equity Derivatives November 29, 2018 FIN 301 - Introduction Dr. Menahem Rosenberg

FIN 301 - Introduction Dr. Menahem Rosenberg Types of Securities: U.S. Treasury Bills Notes and bonds Other government bonds Commercial papers and Bankers acceptance Negotiable certificate of deposit (CD’s) Corporate bonds Preferred stocks Common stocks November 29, 2018 FIN 301 - Introduction Dr. Menahem Rosenberg

Types of Securities (continue): Options Forward contracts Future contracts November 29, 2018 FIN 301 - Introduction Dr. Menahem Rosenberg

FIN 301 - Introduction Dr. Menahem Rosenberg Financial Markets: NYSE NASDAQ Commodity Markets CME CBT NYMEX November 29, 2018 FIN 301 - Introduction Dr. Menahem Rosenberg