An Overview of Financial Management Rick Nason, PhD, CFA What a Financial Manager Does • Capital Budgeting – What to spend money on • Capital Structure – How to get the money to spend • Capital Analysis – What is something worth • Working Capital Management – Managing the day to day cash flows • Risk Management – Managing the possibility that bad or good things may happen Goals of the Financial Manager • Maximize Shareholder Wealth • Triple Bottom Line • Maximize Utility • Maximize Earnings • Maximize Cash Flow Maximize Shareholder Wealth ∞ ππππ’π = π=0 πΉπΆπΉπ 1 + ππ΄πΆπΆ π Maximize Shareholder Wealth Financial Management: Theory and Practice: 2nd Canadian Ed., Brigham et. al., Nelson, 2014 Triple Bottom Line • Social • Environmental • Economic Benefits Corporation (B Corp) • Measurement • Subjectivity • Trade-offs Maximize Utility • Maximize Outputs for Inputs • Not-for-Profits Forms of Business Organization • Sole Proprietorship • Partnership – LLC • Corporation – Income Trust Forms of Business Organization • • • • • • Cost (and hassle) to set up Liquidity and marketability Ability to raise capital Taxation Control issues Liability Corporate Governance • Business Organization • Objective of Company οCorporate Governance • Agency Issues 5 Principles 1. If it don’t jingle, it don’t count 2. A $1 today is worth more than a $1 tomorrow 3. Risk is the possibility that bad or good things may happen 4. The greater the risk the greater the expected return 5. Finance is tradeoff of risk and cash flows in time An Overview of Financial Management Rick Nason, PhD, CFA RNason@Dal.ca @RNason_dal
