2. What is Finance?
• Finance can be defined as the science and art of managing money.
• In a business context, finance involves the decisions related to :
how firms raise money from investors,
how firms invest money
how they decide whether to reinvest profits in the business or distribute them back to investors.
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3. Figure 1.3 Financial Activities
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4. Figure 1.1 Corporate Organization
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5. Goal of the firm Maximize the profit
The financial manager would take only those action that were expected to make a major contribution to the firm’s overall profit
`There are others conditions that affect the financial decision
Timing
Cash flows
Risk

6. Goal of the firm
Maximize shareholder wealth The main goal of the firm is to maximize the wealth of the owner for whom it is being operate , so the financial manager should accept only those actions that are expected to increase share price
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7. Financial institution and markets
Financial institutions :
Is an intermediary that channels the saving of individuals , businesses and governments into loans or investment
Financial markets:
Are forums in which suppliers of funds and demands of funds can transact business directly
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8. Payback period
Payback period: refers to the amount of time required for the firm to recover its initial investment in a project.
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