Principles of

Corporate Chapter 1
Finance
Why Finance Matters
Seventh Edition

Richard A. Brealey
Stewart C. Myers

Slides by
Matthew Will

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Topics Covered
 What Is A Corporation?
 The Role of The Financial Manager
 Who Is The Financial Manager?
 Separation of Ownership and Management
 Financial Markets

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Corporate Structure

Sole Proprietorships
Unlimited Liability
Personal tax on profits
Partnerships

Limited Liability
Corporations Corporate tax on profits +
Personal tax on dividends

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Role of The Financial Manager

(2) (1)

Firm's Financial Financial

(4a)
operations manager markets

(3) (4b)

(1) Cash raised from investors

(2) Cash invested in firm
(3) Cash generated by operations
(4a) Cash reinvested
(4b) Cash returned to investors

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Who is The Financial Manager?

Chief
ChiefFinancial
FinancialOfficer
Officer

Treasurer Comptroller

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Ownership vs. Management

Difference in Information Different Objectives

 Stock prices and returns  Managers vs.

 Issues of shares and stockholders
other securities  Top mgmt vs. operating
 Dividends mgmt
 Financing  Stockholders vs. banks
and lenders

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