1. Chapter 1 Overview of Financial Management  Introduction  Class Structure - Syllabus  Text – Preliminary Draft of Fin. Mgmt.  Exams – Open Book and Open Notes  Expectations  Attendance  Preparation for Class

2. BA 340 - Finance  Keys to success  Reading Ahead of Lectures  Trying Assigned Problems  Asking Questions  Staying on Task  Getting Help Early  Philosophy - this course is basic intuition but with a new language…

3. Chapter One – Financial Management Overview  Primary Function – Cycle of Money  Finance Areas  Financial Manager  Financial Management Decisions  Goal of Finance  Players  Forms of Business  Agency Model

4. Cycle of Money  Moving Money  From lenders to borrowers  Returning Money from borrowers to lenders  Institutions  Banks – Financial Intermediaries  Takes on risk of nonpayment for a fee  Advantage of Using Institution  For lender – ready partner with known rates  For lender – reduction or elimination of default risk  For borrower – ready partner with known rates  For both – reduction of search time

5. Finance Areas  Corporate Finance  Activities that support business operations  Long and short term activities  Investments  Buying and Selling Securities  Trading Rules and Regulations  Financial Institutions – Banks, Insurance, Etc.  International Finance  Companies with operations in multiple countries  Foreign governments and currency issues

6. Financial Manager  Who is the Financial Manager?

7. Financial Management Decisions  Capital Budgeting  allocation of funds to projects  Capital Structure  portfolio of borrowing  Working Capital Management  handling cash  accounts payable/accounts receivable  inventories

8. Goal of Finance  Profit Maximization  Net income?  Cash flow?  Maximize Current Stock Price  Trade-offs  Safe and Happy Work Place  Customers Happy  Good Relationship with Surrounding Community  Broad Definition of Stock Price Impact  Social Welfare  Job Security  Ethical and Legal Actions

9. The Financial Manager in the Organization (Players) CEO Marketing Manager Finance Manager TreasurerController Investor Relations Manufacturing Manager Information Manager Human Resource Manager.

10. Forms of Business  Sole Proprietorships  Simple and Most Common  Personal Assets Co-mingled w/ Company  Partnership  Added capital and people  Ownership Transfer difficult  Corporation  Legal Separate Entity  Limited Liability of Owners (Stockholders)

11. Agency Model  Agency Theory  Principal and Agent  Agent works for and in the interest of the Principal  Agent has personal interests as well  Company and personal interests are not always aligned  Principal (Owner) influences Agent  Reward good behavior  Punish bad behavior  Problems with Observing Behavior (Effort)  Adding costs to ensure appropriate behavior (effort)  Agency costs

12. Corporate Control  Who owns the company?  Equity holders -- Shareholders  Who runs the company?  Managers elected by the owners  Government Regulations  Rules and requirements to run the business  Other Stakeholders  Employees, Suppliers, Customers, Community

13. Questions  Question #2 – Example of Cycle of Money  Question #7 – Community and Stock Price  Question # 9 – Parent – Child Conflict  Question #10 – Jackson Hole Employees  Current agency cost  Possible Solutions  Possible Costs to each Solution  Direct and Indirect  Best choice?