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Accounting
concerned with score keeping
Finance
aimed at value maximizing
Accounting
deals primarily with the past
Finance
concerned mainly with the future
Financial management
broadly concerned with the acquisition and use of funds by a business firm.
Profit Maximization, Maximizing Earnings per share, Shareholder’s Wealth Maximization
Goals of Financial Managament
Business proposal
regardless of whether it is a new investment or acquisition of another company or a restructuring initiative - raises the value of the firm only if the present value of the future stream of net cash benefits expected from this is greater than the initial cash outlay required to implement this.
Capital budgeting
what long term investments or projects should the business take on?
Capital spending
How should we pay for our assets? Should we use debt or equity?
Working capital
how we manage the day-to-day operations of the firm.
Investing decision, Financing decision, Dividend decision
Decisions under financial management
Investing decision
decisions relating to working capital management, inventory management, receivables management
Dividend decision
the decision relates to how much of the earnings to be distributed as dividends and how much to be kept as retained earnings
engineer
who proposes a new plant, shapes the investment policy firm
marketing analyst
provides input in the process of forecasting and planning
purchase manager
influences the level of investment in inventories
sales manager
has a say in the determination of the receivables policy
departmental managers
in general, are important links in the finance control system of the firm
general partnership, limited partnership
two types of partnerships
general partnership
(most common type) all partners are responsible for management and the financial responsibilities of the partnership
limited partnership
at least one partner is not active in the day to day running of the business. they have limited liability
Articles of partnership
contract between partners spelling out the rule of partnership
Incorporate
to form a corporation
Charter
a document granted by the state giving a corporation the right to do business
stock
shares of ownership in the corporation
stockholders
owners of stock
dividends, speculation
reasons to own a stock
dividends
share of corporate profits paid to stockholders
speculation
buy in low that price of stock will increase
raise money faster, increase efficiency, acquire new product lines, catch up or eliminate rivals, lose a company identity
5 reasons to merge
horizontal merger
when two or more company that produce the same kind of product join forces
vertical merger
when two or more firms that are different steps of the production process join together
conglomerates
is a firm that has at least four or more businesses, each making unrelated products
Note 
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