CHAPTER 1: OVERVIEW OF FINANCIAL MANAGEMENT

CHARACTERISTICS OF SUCCESFUL COMPANIES  Disadvantages over Partnership:

1. Corporate earnings may be subject to double
1. successful companies have skilled people Hit sa position) taxa on—the earnings of the corpora on are taxed
2. successful companies have strong rela onships ( smooth operations) at the corporate level, and then earnings paid out as
3. successful companies have enough funding ( know how to dividends are taxed again as income to the
turds)
procure stockholders.
2. Se ng up a corpora on involves preparing a charter,

/
mas
risky /unanyabitawng pom) wri ng a set of bylaws, and filing the many required
state and federal reports, which is more complex and
me-consuming than crea ng a proprietorship or a
-
= partnership.
 Professional Corpora on (PC) or a Professional
Associa on (PA) - wherein professionals such as
_

doctors, lawyers, and accountants form a

corpora on.
 S corpora ons - corpora ons that meets all the
THE CORPORATE LIFE CYCLE requirements but elect to be taxed as if a
proprietorship or partnership.
Star ng Up as a Proprietorship - an unincorporated  “Angel” or Venture Capitalists - individuals or
business owned by one individual businesses that provides funding for companies that
 Advantages: are too risky for banks
 Securi es and Exchange Commission (SEC)
F a) It is easily and inexpensively formed.
 regulates stock trading, to sell shares in a public
F b) It is subject to few government regula ons.
stock market
N c) Its income is not subject to corporate taxa on but is
taxed as part of the proprietor’s personal income.  where a company applies to be a listed stock on an
 Limita ons: 's growing it SEC-registered stock exchange

Abusing
they are
going public
F a)
It may be difficult for a proprietorship to obtain the
Growing a Corpora on: Going Public - also called ini al
funding needed for growth.
public offering (IPO) because it is the first me the company’s
u b) The proprietor has unlimited personal liability for
shares are sold to the general public.
the business’s debts, which can result in losses that
exceed the money invested in the company.  IPOs are o en aided by investment banks with
Li
c) The life of a proprietorship is limited to the life of its IPO
brokerage firms that employs brokers who are
founder. registered with the SEC to buy and sell stocks on
behalf of clients.
More Than One Owner: A Partnership - two or more 
SEO Seasoned Equity Offering - when public company
persons or en es associate to conduct a noncororate raises more funds by selling (i.e., issuing) addi onal
business for profit. shares of stock. Kitana malaas
any demand hence
:

unlimited Hab
,

- magbentapatayong
shares

 General Partnership - a business arrangement by For income more

Managing a Corpora on’s Value (funds )

which two or more individuals agree to share in all From PUBLIC

assets, profits, and financial and legal liabili es of a “What determines a corpora on’s value?” - it’s a company’s
jointly-owned business. ability to generate cash flows now and in the future
 Limited Partnership - certain partners are
designated general partners and others limited Three (3) proper es of its cash flows:
partners. Limited partners can lose only the amount
s 1. The size of the expected future cash flows is

)
of their investment in the partnership, while the important—bigger is be er.
general partners have unlimited liability. Limited Ti 2. The ming of cash flows counts—cash received

/
partners typically have no control—it rests solely sooner is more valuable than cash that comes later.
with the general partners—and their returns are 3. The risk of the cash flows ma ers—safer cash flows

\
likewise limited. are worth more than uncertain cash flows.
Limited lang dapat
 Limited Liability Partnership (LLP) and a Limited alam hang gang
,

Liability Company (LLC), all partners (or members) saan , tang

yµµ
Ka

,µµµ,  Managers increase the firm’s value by increasing

ma

enjoy limited liability with regard to the business’s the size of the expected cash flows, by speeding up
liabili es, and their poten al losses are limited to their receipt, and by reducing their risk.
their investment in the LLP. satisfy creditors

g
1. Free Cash Flows (FCF) - they are available (or free)
, ,
out dividends
for distribu on to all of the company’s investors,
Many Owners: A Corpora on - a legal en ty created under to shareholders
including creditors and stockholders
state laws, and it is separate and dis nct from its owners and dividends required
-
-

2. Weighted Average Cost of Capital (WACC) - the rate

managers. POV Investors ( income )
[ of return required by investors, a cost from the
:

cost
)
 Major Advantages: POV : /
company exp [company’s point of view
hindi maiolo any earnings

L a) unlimited life I right of succession) 3. Market Price - the price that we observe in the
{(
MANAGING A CORP 'S VALUE

T b) easy transferability of ownership interest ten basehanng value

* → financial markets, SHOULD BE equal to the@ intrinsic
/\ of company value.
c) limited liability
t F-
good indicator
comp that
to

wmp might
is
doing well
nintihat

problem
have perceived value not accurate / bated
uestionabte ?
>

19 :
observation)
,

manipulated )
on

Realvalneofthebusinej @
)
• all relevant info used to come w/ this Value
up
 principles OF right /wrong
✓
GOVERNING A CORPORATION ETHICS AND INTRINSIC STOCK VALUE MAXIMIZATION
 Agency Problem  Managers at some companies have taken illegal and
- a conflict of interest that exists in any unethical ac ons to make es mated future cash
rela onship flows appear be er than truly warranted, which can
- one party is expected to act in the best drive the market stock price up above its intrinsic
interests of the other. value.
 Corporate Governance  Sarbanes-Oxley (SOX) Act of 2002 and the Dodd-
a set of rules that control the company’s behavior Frank Wall Street Reform and Consumer Protec on
toward its: Act of 2010 strengthened protec on for
 directors ① ACCOUNTABILITY whistleblowers who report financial wrongdoing.

¥¥¥{
 managers
 employees
 shareholders
②TRANSPARENCY
AN OVERVIEW OF FINANCIAL MARKETS

The Net Providers and Users of Capital

É¥É
 creditors
 customers  Net Savers
 compe tors ③ FAIRNESS 1. Public / Individuals
 community  Net Borrowers
1. Nonfinancial corpora ons

=
MAXIMIZING STOCKHOLDER WEALTH 2. Financial corpora ons
3. Government
 Maximizing Shareholder Wealth
duty is to maximize  is a fiduciary duty for most corpora ons THE CAPITAL ALLOCATION PROCESS
the but  does not mean that managers should break
profit ,

stakeholder welfare
's
laws or violate ethical considera ons,  Capital
must not be - an essen al component of star ng and maintaining
sacrificed
 or that that managers should be unmindful
of employee welfare or community a successful business
concerns. Profit centered but
-

also - money and assets needed by a business to produce

w/ the welfare
cares of
 Benefit corpora on (B-Corp) – stakeholders ( internal / ) external
the products or services it offers.
 a corporate form that expands directors’
Transfers of capital from savers to users:
fiduciary responsibili es
 include interests other than shareholders’ D 1. Direct Transfers
interests. 2. Indirect Transfers through an Investment Bank

INTRINSIC STOCK VALUE MAXIMIZATION AND SOCIAL ¥ 3. Indirect Transfers through a Financial Intermediary

WELFARE Fraud deception / intentional

-

 Illegal Ac ons:
1. Fraudulent accoun ng
2. Exploi ng monopoly power ( greedy ) ness
1- markup
01216 SH/ B
3. Viola ng safety codes
4. Failing environmental standards limited ; must not be
resources
exploited) Temporary

① writing
bought Lander
 ORDINARY CITIZENS AND THE STOCK MARKET OWN sit/ B
- Households own mutual funds, directly or indirectly /
owns stocks through pension funds.
- When managers increase intrinsic value of stocks, Three important features of the capital alloca on process:
they improve people’s quality of life.

o  CONSUMERS AND COMPETITIVE MARKETS N 1. New financial securi es are created.

2. Different types of financial ins tu ons o en act as
- Value maximiza on requires efficient, low-cost A
businesses that€-7
produce high-quality goods and intermediaries between providers and users.
services at the lowest possible cost.
to create loyal Ex
✓ 3. The ac vi es occur in a variety of financial markets.
- Companies that maximize their stock price must
THE DETERMINANTS OF INTRINSIC VALUE
generate growth in sales by crea ng value for
customers in the form of:
1.
2.
efficient and courteous service
adequate stocks of merchandise
¥
3. =
well-located business establishments. W
Em  EMPLOYEES AT VALUE-MAXIMIZING COMPANIES
- In general, companies that successfully increase
stock prices also grow and add more employees,
thus benefi ng society.
- Newly priva zed companies tend to grow and thus
require more employees when they are managed
with the goal of stock price maximiza on.
 CHAPTER 2: NATURE, PURPOSE AND SCOPE OF  THE REAL ISSUE: is maximizing capital use through
FINANCIAL MANAGEMENT successful financial planning and control.

Any company's financial health is crucial THE SCOPE OF FINANCIAL MANAGEMENT

 Finances, like most other resources, are, however,

finite.
 Wants, on the other hand, are o en limitless. As a
result, it is important for a company to effec vely
control its finances.

IMPORTANT: for any company TO INVEST THE FUNDS IT

F I D
RECEIVES in such a way that the investment yields a higher
return than theI
cost of capital. gash sa pnnganyapital
uuruwy ( may interest ) CORE FINANCIAL MANAGEMENT DECISIONS
>

Financial management, in a nutshell :

> service change / Hankins
charge Managers of companies make the following decisions in order
Red 1. Endeavours to reduce the cost of finance to reduce the costs of obtaining finance and to use it in the
Su 2. Ensures sufficient availability of funds most efficient way possible:
Po 3. Deals with the planning, organizing, and controlling
Investment Decisions: Managers must determine the
Pro of financial ac vi es like the procurement and
u liza on of funds braining amount of investment available from exis ng funds,
Chartreuse the both long- and short-term. There are two kinds of them:
DEFINITIONS OF FINANCIAL MANAGEMENT
CB a) Capital Budge ng (Long-term investment decisions)
1. Guthman and Dougal prato A - commi ng funds for a long me (fixed assets)
-
_

 “FM is the ac vity concerned with planning, raising, - normally irreversible (purchase of a building
controlling and administering of funds used in the and/or property, the acquisi on of new
business.” plants/machinery or the replacement of old
2. J.F. Brandley ones)
 “FM is that area of business management devoted - influence a company's financial goals and
to a judicious use of capital and a careful selec on results.
of the source of capital in order to enable a WCM b) Working capital management (Short-term
spending unit to move in the direc on of reaching investment decisions)
the goals.” - commi ng funds for a short period of me (current
-

3. Massie assets)
 “FM is the opera onal ac vity of a business that is - include cash, bank deposits, and other short-term
responsible for obtaining and effec vely u lizing the -
investments inventory investment.
e-
funds necessary for efficient opera ons.” - direct impact on a company's liquidity and
profitability.
NATURE, SIGNIFICANCE, AND SCOPE OF FINANCIAL
MANAGEMENT Financing Decisions: Managers must also make
decisions on raising funds from long-term (Capital
FM is a natural part of its opera on. To: Structure) and short-term sources (called Working
Capital). There are two kinds of them:
P a) procure physical resources
b) carry out manufacturing ac vi es and other
C FPD a) Financial Planning Decisions
business opera ons - es ma ng the origins and applica ons of funds
p c) pay compensa on to vendors, and so on, every - an cipa ng a company's financial needs to
company requires funds. ensure that sufficient funds are available
THERE ARE SEVERAL FINANCIAL ACCOUNTING The primary goal:
THEORIES:
 to prepare ahead of me to ensure that funds
1. This strategy is mainly concerned with the are available when needed.
ACQUISITION OF ASSETS, which can include
Cast b) Capital Structure Decisions
instruments, ins tu ons, and fundraising ac vi es. It - loca ng funding sources
also looks a er the legal and accoun ng aspects of a - decisions on whether to raise funds from
company's rela onship with its funding source. external sources such as selling shares, bonds,
2. Since all business transac ons, whether directly or or borrowing from banks, or from internal
indirectly, include cash, FINANCE IS CONCERNED sources such as retained earnings.
WITH EVERYTHING THE COMPANY DOES.
 Financial management encompasses BOTH THE Dividend Decisions: These are decisions over how much of
ACQUISITION AND EFFECTIVE USE OF FUNDS. In the a company's earnings will be paid as dividends.
case of a manufacturing company, for example,
 Shareholders o en seek a higher dividend,
financial managers must ensure that funds are
while management prefers to keep income for
sufficient for the installa on of the manufacturing
opera onal purposes. As a result, this is a
plant and machinery. Many companies can easily
difficult managerial decision.
raise capital in a developed market.
 CHAPTER 3: RELATIONSHIP of FINANCIAL OBJECTIVES i.e., maximizing benefits at the lowest possible
to ORG STRATEGY & OTHER ORG OBJECTIVES cost.
- This is commonly understood to necessitate the
FINANCIAL OBJECTIVES AND ORGANIZATIONAL use of economy, effec veness and efficiency.
STRATEGY → Future VISION
 To achieve a certain amount of outputs, the
→ present ,
what you'll do
ECONOMY must
to achieve the vision
- obtain the required quan ty and quality of
→ Long-term target outcome inputs AT THE LOWEST POSSIBLE COST. For
example, the economy in which a school
: : :÷¥:*
M
-

measurable

purchases equipment can be calculated by

÷ ¥→ R
1-
-

-
ealistic
itime
-
bound
specific short-term targets a - comparing real costs to budgets, previous year's
to achieve the goals

costs, government/local authority requirements,

or other schools' spending.
 The degree to which stated objec ves/goals are
met is referred to as EFFECTIVENESS.
GROWTH
- The propor on of students who go on to higher
C expand / just be
stable or further educa on, for example, may be used
COMPETITIVENESS
to assess the efficacy of a school's goal of
is current Ppe
producing quality teaching.
effective
compared
others
to
 The rela onship between inputs and outputs is
known as EFFICIENCY.

① - The efficiency in which a school's IT laboratory is

FUNCTIONAL

how we implement used, for example, may be calculated in terms of

the percentage of the school week that it is used
SHAREHOLDER WEALTH MAXIMIZATION
STAKEHOLDERS
 Most companies are owned by shareholders and
While a private sector corpora on's theore cal goal may be
originally set up to make money for those
to increase its shareholders' wealth, other individuals and
shareholders. The primary objec ve of most
organiza ons are interested in what the company does and
companies is thus to MAXIMISE SHAREHOLDER
may be able to influence its corporate goals.
WEALTH. (This could involve increasing the share
price and/or dividend payout.)  Stakeholders
 Shareholder wealth maximisa on is a fundamental - people who are interested in a company's
principle of financial management. Many other opera ons or success because they have a stake
objec ves are also suggested for companies or an interest in what happens.
including:

: a) profit maximiza on MOST COMMON TYPES OF STAKEHOLDER GROUPS IN AN

b) growth ORGANIZATION:

Mark c) market share  Internal:

so
d) social responsibili es 1. Directors D
2. Employees E
ONE ISSUE (mee ng the goals of many stakeholders at the
same me)  Connected: (a) Cui Gupta
1. Shareholders gna [
EXAMPLE: Reducing salaries will increase profits and please 2. Leaders
shareholders, but it is unlikely to sa sfy workers. As a result, 3. Customers
a dis nc on between maximising and sa sfying must be 4. Suppliers
made in prac ce. 5. Labour union
certain
-
a) Maximising – seeking the best possible outcome  External:
Go
-

b) Sa sficing – finding a merely adequate outcome 1. Government

\ so
acceptable 2. Society as a whole
OBJECTIVES IN NOT-FOR-PROFIT ORGANIZATIONS
Goal incongruence between stakeholders
Not-for-profit organisa ons (chari es, state health services,
and police forces) Example:

- purpose of providing a service rather than profit.  Bondholders

- place a premium on value for money, or trying to - seek a steady stream of income in the form of
get the most benefits for the least amount of interest and the assurance that their principal
money. (Since it is not possible to set financial goals will be repaid.
in the same way as businesses do) - Risky projects are avoided
 Value for money  Shareholders
- obtaining the best possible combina on of - seek rising dividends and, as a result, rising
services by using the fewest resources possible, stock prices.
 - Risky projects are welcomed because the will be en ced to make choices that are likely to
HIGHER THE RISK, THE HIGHER THE result in higher share prices (such as inves ng in
RETURN projects with posi ve net present values), as this will
increase their share op on incen ves.
AGENCY PROBLEM 2. Having a sufficient number of qualified non-
execu ve directors on the board. They are not full-
 Conflict of interests between different stakeholders
me workers and do not hold any execu ve posi ons
of a corpora on, such as shareholders and
bondholders or employees and shareholders, is ¥ in the company. They have the ability to behave in
the shareholders' best interests.
referred to as an agency issue. They can appear in a
3. Where there is (or may be) a conflict of interest
variety of ways.

¥ ¥ ≤¥
between execu ve directors and the company's best
1. Moral hazard
interests, independent non-execu ve directors may
- A boss has a vested interest in reaping the
also make decisions. Non-execu ve officers, for
rewards of his or her job. All of the perks that
example, may be in charge of remunera on
come with status, such as a company vehicle,
arrangements for execu ve directors and other
use of a company plane, lunches, and so on, are
senior managers.
included.
4. The possibility of a hos le takeover. If a company is
2. Effort level
poorly run, the stock price would be low in
- Managers could put in less effort than if they
comparison to its future value. When the stock price
were the company's owners. In a large
is poor, compe ng management teams are more
corpora on, the issue would occur at both the
likely to launch a hos le takeover. In most cases, the
middle and senior management levels.
É current management will be dismissed. As a result,
3. Earnings reten on
managers are compelled to op mize share prices.
- Rather than earnings, the size of the business is
also used to determine the remunera on of INCENTIVE SCHEMES
directors and senior managers. Rather than
paying out dividends, management is more  A remunera on package for execu ve directors or
likely to want to reinvest profits in order to senior managers may have a variety of structures,
grow the business. but most remunera on packages have at least three
4. Risk aversion components.
- Execu ve directors and senior managers B 1. A basic salary – it needs to be high enough to a ract
typically receive the majority of their profits and retain individuals with the required skills and
from the organiza on for which they work. As a talent.
result, they care about the company's stability A 2. Annual performance incen ves – The performance
because it will secure their job and future target might be stated as profit or earnings growth,
earnings. This may indicate that management is EPS growth, achieving a profit target, etc. Some
risk averse and unable to invest in higher-risk managers might also have a non-financial
ventures. performance target.
5. Time horizon L 3. Long-term performance incen ves – Which are

L
- Shareholders are concerned about their linked in some way to share price growth. Long term
company's long-term financial prospects incen ves are usually provided in the form ofO share
because the value of their shares is based on awards or- share op ons of the company.
Kant middle
long-term assump ons. management lamaaglprivi ledge to )
- Managers, on the other hand, could be only
CORPORATE GOVERNANCE avail

concerned with the short term. This is partly due - The collec on of procedures, customs, rules, laws,
to the fact that they may be paid annual and ins tu ons that regulate how a corpora on (or
bonuses based on short-term results, and partly company) is guided, managed, or regulated
due to the fact that they may not plan to stay - The rela onships between the stakeholders and the
with the organiza on for more than a few purposes for which the company is regulated are
years. discussed in corporate governance.
Agency costs include direct and indirect costs. There are a number of key elements in corporate
1. Direct costs include remunera on and audit fees.
governance:
R GO E A ACC
2. Indirect costs include the cost of lost opportunity
because of agency problems. R 1. Risk management and mi ga on is a central theme
in all concep ons of good governance, whether
specifically specified or implicitly.
Reducing the agency problem
2. Most concepts are based on the idea that good
Several methods of reducing the agency problem have been Go organiza onal frameworks and management
suggested. These include: prac ce within set best prac ce guidelines improve
overall efficiency.
1. Crea ng a compensa on plan for execu ve directors
and senior managers that encourages them to E 3. From the perspec ve of all stakeholder groups
affected, good governance provides a basis for an
Hurt behave in the best interests of the company's
level organiza on to execute its policy in an ethical and
shareholders. Offering managers share op ons, for efficient way, as well as protec ons against the
shanoph.MG example, is one way to mo vate them to behave in
*
misuse of physical or intellectual capital.
to motivate
ways that maximize shareholder capital. Managers
employee to
exert effort
A 4. Good governance necessitates not only the
applica on of externally defined laws, but also the
CHAPTER 4: FUNCTIONS OF FINANCIAL MANAGEMENT

ability to apply both the spirit and the le er of the Func ons of Financial Management
law.
AC 5. Accountability is generally a major theme in all
governance frameworks.
Financial management (art and science of handling a
company's resources in order to achieve its objec ves)

- not solely the domain of the finance department.

CORPORATE GOVERNANCE CODES OF GOOD PRACTICE - Any business decision has a monetary impact.
GENERALLY COVER THE FOLLOWING AREAS:  Financial workers must work closely with managers
in all departments.
Leadership and Decision Making (1, 2, 3):
 Sales of the company's goods
1. The board should be responsible for taking major
B - Should be the primary source of funding.

#
policy and strategic decisions. - But does not always arrive when it is required
2. Directors should have a mix of skills and their to pay the bills.
performance should be assessed regularly. D - Hence, Financial managers must keep track of
3. Appointments should be conducted by formal how money enters and exits the company.
procedures administered by a nomina on A - Must collaborate with the firm's other
commi ee (or selec on commi ee). department heads to decide how funds will be
allocated and how much money is needed. Then
Roles and Responsibili es (4, 5):
they decide on the best ways to get the capital
C sales ash
they need.
-

4. Division of responsibili es at the head of an 0

-

investment
owner 's

I ✓ CASH INFLOWS AND OUTFLOWS

or rowed Funds
B
-

organisa on is most simply achieved by separa ng g

-
sales of Fixed assets

co
-

collection of
AIR
the roles of chairman and chief execu ve.
5. Independent non-execu ve directors have a key role
in governance. Their number and status should
mean that their views carry significant weight.
In
Compensa on and Transparency (6, 7, 8):

6. Directors' remunera on should be set by a

remunera on commi ee consis ng of independent
① D
② non-execu ve directors.
7. Remunera on should be dependent upon Re
organisa on and individual performance.
8. Accounts should disclose remunera on policy and A
(in detail) the packages of individual directors. Financial Manager: This person is like your budget planner.
They track your daily income and expenses (cash flow) to
Risk Management and Controls (9, 10):
make sure you have enough money to pay bills (obliga ons).
①
9. Boards should regularly review risk management Bo They also look at bigger picture things, like whether you can
afford a new car (manufacturing plant) and how to pay for it
and internal control, and carry out a wider review
annually, the@results of which should be disclosed in (funding).

&
the accounts.
10. Audit commi ees of independent non-execu ve At . Accountant: This person is like your record keeper. They track
all your income and expenses me culously, like keeping
① liaise with external auditors,
directors should
③ receipts and wri ng things down in a notebook (financial
supervise internal audit, and review the annual
data). They don't necessarily decide how to spend the money,
accounts and internal controls.
they just make sure everything is recorded accurately.
Communica on (11, 12):
The Key Difference:
11. The board should maintain a regular dialogue with
shareholders, par cularly ins tu onal shareholders. Ann
Financial managers use the informa on accountants provide
GM to make decisions. They analyze the financial data (like
The ANNUAL GENERAL MEETING is a significant
budgets and reports) to understand the company's financial
forum for communica on.
12. Annual reports must convey a fair and balanced Ann health and make informed choices about spending and future
Rep plans.
view of the organisa on. This might include whether
①
the organisa on has complied with governance Who's in Charge?
② give specific disclosures
regula ons and codes, and
about the board, internal control reviews, going O en, the head of finance (CFO) oversees both accoun ng
concern status and rela ons with stakeholders. and financial management. It's like having one person
responsible for both budge ng and record-keeping in your
household, although the tasks themselves are separate.
THE FINANCIAL MANAGER’S RESPONSIBILITIES AND
ACTIVITIES
Financial managers have a difficult and dynamic role.

- examine financial details prepared by accountants

- keep track of the company's finances
- develop and execute financial strategies

The financial manager's main responsibili es include:

1. Financial planning: Preparing the financial plan,
Fip / g- projects
( over period)
which projects revenues, expenditures, and financing
needs over a given period.
""

:*
: :÷÷÷
2. Investment (spending money): Inves ng the firm’s In -

HGH RETURN
=

funds in projects and securi es that provide high

returns in rela on to their risks. obtain funds
3. Financing (raising money): Obtaining funding for Fin -

[Balanced )
"
the firm’s opera ons and investments and seeking debt equity
the best balance between debt (borrowed funds)
and equity (funds raised through the sale of
ownership in the business).

The Goal of the Financial Manager

The financial manager's key aim is to op mize the firm's
value to its owners.

 The share price of a publicly traded corpora on's

@ SOLD
stock is used to determine its worth. The value of a private -

PRICE
private corpora on is determined by the price at
which it may be sold. -
 The financial manager must weigh both the short-
and long-term ramifica ons of the firm's decisions in
order TO MAXIMIZE THE FIRM'S WORTH.
 Profit maximiza on is one strategy, but it should not
be the only one. SHORT-TERM BENEFITS ARE
PRIORITIZED OVER LONG-TERM objec ves in this
strategy.
Enumeration :
Business orgs
What if a company in a highly technical and compe ve
* 3 Types of
industry didn't invest in R&D? > sole Proprietorship
>
Partnership
 Profits will be high in the SHORT TERM due to the >
Corporation
high cost of research and development. Fin Manager
 However, the company's ability to compete could be
* 3 Responsibilities of

harmed in the LONG RUN due to a lack of new > Financial Planning
products. THIS IS VALID REGARDLESS OF THE SCALE
> Investing
OR STAGE OF A COMPANY'S LIFE CYCLE.
> financing
Gov
* 3 Pillars of Corp
> Fairness
> Transparency
> Accountability
Probs
Agency
*
5

moral hazards
Effort level

Earnings Retention
Risk Aversion
Time
-
Horizon
4- 5 ex cash inflows
cash sales
owner 's Investment
Borrowed Funds
sale of Fixed Assets
Collection of AIR