coprate finance

8/9/2019 Coprate Finance

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INSTRUCTOR: M.JIBRAN SHEIKH

CONTACT: jibransheikh@cosa!s.e"#.$k

INTRODUCTION TOCORPORATE FINANCE


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OUTLINE

1.1 What is corporate fnance?

1.2 The oa! o" fnancia! #anae#ent

1.$ The aenc% pro&!e# an' contro! o" thecorporation

1.( Ethics an' corporate o)ernance

1.* Financia! #ar+ets


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T6E CAPITAL 7UD8ETIN8 DECI-ION

CurrentAssets

Fixed Assets

1 Tangible

2 IntangibleShareholders

’ Equity

Current

Liabilities

Long-Term

ebt

!hat long-termin"estmentsshould the #irm$hoose%


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,ODERN FOR, OF FIR,-

• Corporation a &0siness create' as a 'istinct!ea! entit% co#pose' o" one or #ore in'i)i'0a!sor entities9 e..9 I7,.

•

-eparation o" contro! :shareho!'ers; an' #anae#ent:pro"essiona!s;.

• O


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FINANCIAL ,ANA8ER-

• Fre50ent!%9 fnancia! #anaers tr% to a''ressthese tas+s.

• The top fnancia! #anaer


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PO--I7LE 8OAL- OF FINANCIAL,ANA8E,ENT

• -0r)i)e

• 7eat the co#petition

• ,a4i#ie sa!es

• ,a4i#ie net inco#e

• ,a4i#ie #ar+et share

• ,ini#ie costs

• ,a4i#ie the )a!0e o" :stoc+; shares


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T6E @APPROPRIATE 8OAL OF FINANCIAL,ANA8E,ENT

• ,a4i#ie the :"0n'a#enta! or econo#ic; )a!0eo" :stoc+; shares is the riht oa!.

• Wh%? -hareho!'ers o


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6O,E DEPOT CEO 8ET- 21 ,ILLION-EERANCE FOR -UCIN8 AT O7

• Ro&ert L. Nar'e!!i9 the CEO o" 6o#e Depot9


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ALUE -. PRICE

• The )a!0e o" shares are not o&ser)a&!e. Incontrast9 the price o" shares can &e o&ser)a&!e.

• I" one &e!ie)es that share price is an

acc0rateGoo' esti#ate o" share )a!0e9 theappropriate oa!


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T6E A8ENCH PRO7LE,

• Aenc% re!ationship• Principa!s :citiens; hire an aent :the presi'ent; to

represent their interest.

• Princip!es :stoc+ho!'ers; hire aents :#anaers; to r0n

the co#pan%.• Aenc% pro&!e#

• Conict o" interest &et


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A8ENCH CO-T-• Direct costs :1; 0nnecessar% e4penses9 s0ch as

a corporate Ket9 an' :2; #onitorin costs.

• In'irect costs. For e4a#p!e9 a #anaer #a%

choose not to ta+e on the opti#a! in)est#ent.-heGhe #a% pre"er a !ess ris+% proKect so thatsheGhe has a hiher pro&a&i!it% +eepin herGhisten0re.


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,ANA8ERIAL INCENTIE-

• ,anaeria! oa!s are "re50ent!% 'ierent "ro#shareho!'ers oa!s.

• E4pensi)e per+s.

•

-0r)i)a!.• In'epen'ence.

• 8ro


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CORPORATE 8OERNANCE

• Co#pensation

• Incenti)es :9 options9 threat o" 'is#issa!9 etc.; 0se' toa!in #anae#ent an' stoc+ho!'er interests.

•

Corporate contro!• ,anaers #a% ta+e the threat o" a ta+eo)er serio0s!% an'

r0n the &0siness in the interest o" shareho!'ers.

• Press0re "ro# other sta+eho!'ers.


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-AR7ANE-3OMLEH ACT :22;

• @-ar&o4.

• 1 #0st ha)e an assess#ent o" the fr#sinterna! contro! str0ct0re an' fnancia! reportin.

• The o=cers #0st e4p!icit!% 'ec!are that 1 'oesnot contain an% "a!se state#ents or #ateria!o#issions.

• The o=cers are responsi&!e "or a!! interna!

contro!s.


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PRINCIPLE 1

• 8o!'en r0!e Do 0nto others as %o0


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PRINCIPLE II

• Con"0cianis# Do not 'o to others


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DILE,,A

• Ethica! 'ecisions o"ten %ie!' a 'i!e##a.

• -0ppose that %o0


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-O9 W6AT I- T6E AN-WER?

• I 'o not ha)e an ans


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FINANCIAL ,ARET-

• Cash o

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