公司金融学英语课件：Ch1 Goals and Governance of the Corporation

GoalsandGovernance

oftheCorporation1TopicsCovered1.1 InvestmentandFinancingDecisions1.2 WhatisaCorporation?1.3 WhoIstheFinancialManager?1.4 GoalsoftheCorporation1.5 AgencyProblems,ExecutiveCompensation,andCorporateGovernance2InvestmentandFinancingDecisionsCapitalBudgetingDecisionAlsocalledInvestmentDecisionCapitalExpenditure(CAPEX)decisionDecisiontoinvestinassets(tangibleorintangible)3InvestmentandFinancingDecisionsCapitalBudgetingTANGIBLEASSETSPurchasenewplanesINTANGIBLEASSETSAD,R&Dexpenditures4InvestmentandFinancingDecisionsFinancingDecisionDecisionontheamountsandsourcesoffinancingWhenthefirminvests,itacquiresrealassets,whicharethenusedtoproducethefirm’sgoodsandservices.Thefirmfinancesitsinvestmentinrealassetsbyissuingfinancialassetstoinvestors.5InvestmentandFinancingDecisionsRealAssetsAssetsusedtoproducegoodsandservicesFinancialAssetsFinancialclaimstotheincomegeneratedbythefirm’srealassets6WhatIsaCorporation?CorporationAbusinessorganizedasaseparatelegalentityownedbystockholdersHavelimitedliabilityandcannotbeheldpersonallyresponsibleforthecorporation’sdebts.7TheFourTypesofFirmsSoleProprietorshipPartnershipLimitedLiabilityCompanyCorporation8TheFourTypesofFirmsSoleProprietorshipBusinessisownedandrunbyonepersonTypicallyhasfew,ifany,employeesAdvantagesEasytocreateDisadvantagesUnlimitedpersonalliabilityLimitedlife9TheFourTypesofFirmsPartnershipSimilartoasoleproprietorship,butwithmorethanoneownerAllpartnersarepersonallyliableforallofthefirm’sdebts.Alendercanrequireanypartnertorepayallofthefirm’soutstandingdebts.Thepartnershipendswiththedeathorwithdrawalofanysinglepartner.10TheFourTypesofFirmsPartnership(cont'd)LimitedPartnershiphastwotypesofowners.GeneralPartnersHavethesamerightsandliabilityaspartnersina

“regular”partnershipTypicallyrunthefirmonaday-to-daybasisLimitedPartnersHavelimitedliabilityandcannotlosemorethantheir

initialinvestmentHavenomanagementauthorityandcannotlegallybeinvolvedinthemanagerialdecisionmakingforthebusiness11TheFourTypesofFirmsLimitedLiabilityCompany(LLC)Allownershavelimitedliabilitybuttheycanalsorunthebusiness.RelativelynewbusinessformintheU.S.12TheFourTypesofFirmsCorporationAlegalentityseparatefromitsownersHasmanyofthelegalpowersindividualshavesuchastheabilitytoenterintocontracts,ownassets,andborrowmoneyThecorporationissolelyresponsibleforitsownobligations.Itsownersarenotliableforanyobligationthecorporationentersinto(limitedliability).13TheFourTypesofFirmsCorporation(cont'd)OwnershipRepresentedbysharesofstockOwnerofstockiscalledshareholder,stockholder,orequityholderSumofallownershipvalueiscalledequity.Thereisnolimittothenumberofshareholders,andthustheamountoffundsacompanycanraisebysellingstock.14TypesofU.S.FirmsSource:15WhatIsaCorporation?SoleProprietorshipPartnershipCorporationWhoownsthebusiness?ThemanagerPartnersStockholdersAremanagersandownersseparate?NoNoUsuallyWhatistheowner’sliability?UnlimitedUnlimitedLimitedAretheownerandbusinesstaxedseparately?NoNoYes16WhoIstheFinancialManager?ChiefFinancialOfficer(CFO)SupervisesallfinancialfunctionsandsetsoverallfinancialstrategyTreasurerResponsibleforfinancing,cashmanagement,andrelationshipswithbanksandotherfinancialinstitutionsControllerResponsibleforbudgeting,accounting,andtaxes1718WhoIstheFinancialManager?(1)FinancialManagerFirm’sOperationsRealassetsInvestorsFinancialassets(4b)(4)(3)(2)19(1)Cashraisedbysellingfinancialassetstoinvestors;(2)cashinvested

inthefirm’soperations;(3)cashgeneratedbythefirm’soperations;(4a)cashreinvested;(4b)cashreturnedtoinvestors.Flowofcashbetweeninvestorsandthefirm’soperations:GoalsoftheCorporationShareholdersdesirewealthmaximizationProfitmaximizationMaximizeprofits?Whichyear’sprofits?EarningmanipulationOpportunitycostofcapitalTheminimumacceptablerateofreturnoncapitalinvestmentissetbytheinvestmentopportunitiesavailabletoshareholdersinfinancialmarkets20GoalsoftheCorporationTheInvestmentTrade-Off21AgencyProblemSoleproprietorsfacenoconflictsinfinancialmanagement.Inmostlargecorporationstheownersaremostlyoutsideinvestors,andsothemanagersmaybetemptedtoactintheirowninterestsratherthanmaximizeshareholdervalue.22AgencyProblemAgencyproblemManagersareagentsforstockholdersandaretemptedtoactintheirowninterestsratherthanmaximizingstockholders’value.AgencycostValuelostfromagencyproblemsorfromthecostofmitigatingagencyproblems23AgencyProblemCorporategovernanceThelaws,regulations,institutions,andcorporatepractice