Chapter 01
Chapter 01
Chapter 01
Introduction to Financial
Management
Forms of Businesses
Goals of the Corporation
Stock Prices and Intrinsic Value
Some Recent Trends
Conflicts Between Managers
and Shareholders
1-1
Alternative Forms of
Business Organization
Proprietorship
Partnership
Corporation
1-2
Proprietorships &
Partnerships
Advantages
Ease of formation
Subject to few regulations
No corporate income taxes
Disadvantages
Corporation
Advantages
Unlimited life
Easy transfer of ownership
Limited liability
Ease of raising capital
Disadvantages
Double taxation
Cost of set-up and report filing
1-4
Projected cash
flows to
shareholders
Timing of the
cash flow
stream
Riskiness of the
cash flows
1-6
Determinants of Intrinsic
Value and Stock Prices
(Figure 1-1)
1-8
1-10
1-11