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

2. 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 Introduction Dr. Menahem Rosenberg

3. 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 Introduction Dr. Menahem Rosenberg

4. 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 Introduction Dr. Menahem Rosenberg

5. 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 Introduction Dr. Menahem Rosenberg 6 6 6 10 11 6

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 Introduction Dr. Menahem Rosenberg 5 5 5 6 5 5

7. 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 Introduction Dr. Menahem Rosenberg

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

9. 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 Introduction Dr. Menahem Rosenberg

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

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

12. 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 Introduction Dr. Menahem Rosenberg

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

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