LG1 Define finance and the managerial finance function.
LG2 Describe the legal forms of business organization.
LG3 Describe the goal of the firm, and explain why
maximizing the value of the firm is an appropriate goal for a business.
1-2 Learning Goals (cont.)
LG4 Describe how the managerial finance function is
related to economics and accounting.
LG5 Identify the primary activities of the financial
manager.
LG6 Describe the nature of the principle-agent relationship
between the owners and managers of a corporation, and explain how various corporate governance mechanisms attempt to manage agency problems.
1-3 What is Finance?
• Finance can be defined as the science and art of managing
money. • At the personal level, finance is concerned with individuals’ decisions about how much of their earnings they spend, how much they save, and how they invest their savings. • In a business context, finance involves the same types of decisions: how firms raise money from investors, how firms invest money in an attempt to earn a profit, and how they decide whether to reinvest profits in the business or distribute them back to investors. 1-4 Career Opportunities in Finance: Financial Services • Financial Services is the area of finance concerned with the design and delivery of advice and financial products to individuals, businesses, and governments. • Career opportunities include banking, personal financial planning, investments, real estate, and insurance.
1-5 Career Opportunities in Finance: Managerial Finance • Managerial finance is concerned with the duties of the financial manager working in a business. • Financial managers administer the financial affairs of all types of businesses—private and public, large and small, profit-seeking and not-for-profit. • They perform such varied tasks as developing a financial plan or budget, extending credit to customers, evaluating proposed large expenditures, and raising money to fund the firm’s operations.
1-6 Career Opportunities in Finance: Managerial Finance (cont.) • The recent global financial crisis and subsequent responses by governmental regulators, increased global competition, and rapid technological change also increase the importance and complexity of the financial manager’s duties. • Increasing globalization has increased demand for financial experts who can manage cash flows in different currencies and protect against the risks that naturally arise from international transactions.
1-7 Focus on Practice
Professional Certifications in Finance:
– Chartered Financial Analyst (CFA) – Offered by the CFA Institute, the CFA program is a graduate-level course of study focused primarily on the investments side of finance. – Certified Treasury Professional (CTP) – The CTP program requires students to pass a single exam that is focused on the knowledge and skills needed for those working in a corporate treasury department. – Certified Financial Planner (CFP) – To obtain CFP status, students must pass a ten-hour exam covering a wide range of topics related to personal financial planning.
1-8 Focus on Practice (cont.)
Professional Certifications in Finance:
– American Academy of Financial Management (AAFM) – The AAFM administers a host of certification programs for financial professionals in a wide range of fields. Their certifications include the Charter Portfolio Manager, Chartered Asset Manager, Certified Risk Analyst, Certified Cost Accountant, Certified Credit Analyst, and many other programs. – Professional Certifications in Accounting – Most professionals in the field of managerial finance need to know a great deal about accounting to succeed in their jobs. Professional certifications in accounting include the Certified Public Accountant (CPA), Certified Management Accountant (CMA), Certified Internal Auditor (CIA), and many programs. 1-9
