Topic 1

Finance?

Managing money

Career opportunities in Finance?

Financial services:

• Delivery of advice and financial products to individual,business and government

• Banks=banker,Investment=Broker,Real Estate Agent=Mortgage agent

Managerial Finance:

• Duties of financial manager

• Intermediary between firm’s operations and finance market

• Roles=Capital budgeting,raising funds,cash management

Legal forms of Business Organization?

Profit Making:

• Sole Proprietorship

• Partnership

• Company

Non-Profit Making:

• Clubs&Societies

• Government Agencies

• Co-operatives

Business Types(Definition)?

Sole Proprietorship:

• Owned by 1

• Has their name

Partnership:

• Owned by 2/more

• Professional area(medical/law)

Corporation:

• Created by law

• Private Limited(Sdn Bhd)/Public Limited(Bhd)

Business Types(Strengths)?

Sole Proprietorship:

• Less regulations

• Secrecy

• Profit for owner only

Partnership

• More brain power

• Shared losses

• Personal Tax Return

Corporation

• Limited liability

• Long life

• Better financing access

Business Types(Weaknesses)?

Sole Proprietorship:

• Debts+losses beared alone

• Lacks continuity

Partnership:

• Debts+Losses are shared

• Dissolved when partner dies

• Difficulties in transferring

Corporation:

• Corporate Tax(24%)

• More expensive to organize

• Government regulation

• Lack of secrecy

Club&Society?

• Purpose = Provide experience and services to members

• Financial resources = Individual(entry fee)

• Financial Record = Kept to monitor funds

• FS(Financial Statement) presented during AGM(Annual General Meeting),sent to Registrar of Society

• Examples = Receipts, Income, Statement of Financial Position

Goal of Firm?

• Maximize wealth of shareholders

• Minimize loss, Maximize profit

• Avoid bankruptcy

• Good reputation

• Good employer-employee relationship

Shareholder Wealth?

1. Maximize wealth

2. Enjoy more products&services

3. More cash

4. Dividends / Capital Gains

5. Maximize value of firm

6. Repeat

Parties in Financial Environment?

• Financial Managers = Decide how to invest+obtain funds for invest

• Investors provide funds:

  • Individual = Purchase securities of firms

  • Institutional = Give loans/Purchase securities by other firms

• Financial Market

  • Channel funds from providers with surplus to those with shortage

  • Composed of money and capital market

Financial Institutions?

• Channel savings (individuals,business,governments) into loans/investments

• Commercial banks, saving institutional , insurance, finance companies

• Pay savers interest on deposited funds

• Examples =

  • MIDF - Malaysia Industrial Development Finance

  • MIEL - Malaysia Industrial Estate

  • BITM - Bank Industri dan Teknologi Malaysia