Lecture 1
Finance and The Financial Manager
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Topics Covered
?What Is A Corporation? ?The Role of The Financial Manager ?Who Is The Financial Manager? ?Separation of Ownership and Management
McGraw Hill/Irwin
Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved
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02/03/2012
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What Is A Corporation?
I. Sole proprietorships: Small ventures are owned and managed by a single individual. II. Partnership: Several people join to own and manage partnership. III. Corporations: Issue shares. In the beginning, the shares may all be held by a small group of investors, perhaps the company’s manager and a few backers. In this case the shares are not publicly traded and the company is closely held. Eventually, when the firm grows and new shares are issued to raise additional capital, its shares will be widely traded. Such corporations are known as public companies.
McGraw Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved
Who are the shareholders?
I. People that hold only a few shares ? have a few number of votes and receive a tiny proportion of profits and dividends. Giant pension funds and Insurance companies that hold a huge number of shares ? have a large number of votes, and a large proportion of profits and dividends.
Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved
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II.
McGraw Hill/Irwin
2
02/03/2012
Board of directors
? The board of directors is elected by the shareholders in order to represent the shareholders and manage the corporation ? Separation of ownership and management ? Some of these directors are selected from top management and others are non-executive directors who are not employed by the firm. ? The board of directors appoints top management and its role is to ensure that managers act in the best interest of the shareholders.
McGraw Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights...
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