Principles of Corporate Finance

Brealey and Myers Sixth Edition

Finance and the Financial Manager

Lecturer: Dr. Zvi Wiener
02-588-3049
mswiener@mscc.huji.ac.il
http://pluto.huji.ac.il/~mswiener/zvi.html
Slides by
Matthew Will Chapter 1
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Main Financial Innovations

Money
Loans
Banks and other intermediaries
Stocks
Derivatives
Risk Management

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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
Financial Markets

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Corporate Structure

Sole Proprietorships

Partnerships

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Corporate Structure

Sole Proprietorships
Unlimited Liability
Personal tax on profits
Partnerships

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Corporate Structure

Sole Proprietorships
Unlimited Liability
Personal tax on profits
Partnerships

Corporations

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Corporate Structure

Sole Proprietorships
Unlimited Liability
Personal tax on profits
Partnerships

Limited Liability

Corporations Corporate tax on profits +

Personal tax on dividends

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Role of The Financial Manager

(1)

Firm's Financial Financial

operations manager markets

(1) Cash raised from investors

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Role of The Financial Manager

(2) (1)

Firm's Financial Financial

operations manager markets

(1) Cash raised from investors

(2) Cash invested in firm

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Role of The Financial Manager

(2) (1)

Firm's Financial Financial

operations manager markets

(3)

(1) Cash raised from investors

(2) Cash invested in firm
(3) Cash generated by operations

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Role of The Financial Manager

(2) (1)

Firm's Financial Financial

(4a)
operations manager markets

(3)

(1) Cash raised from investors

(2) Cash invested in firm
(3) Cash generated by operations
(4a) Cash reinvested

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Role of The Financial Manager

(2) (1)

Firm's Financial Financial

(4a)
operations manager markets

(3) (4b)

(1) Cash raised from investors

(2) Cash invested in firm
(3) Cash generated by operations
(4a) Cash reinvested
(4b) Cash returned to investors

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Who is The Financial Manager?

Chief
ChiefFinancial
FinancialOfficer
Officer

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Who is The Financial Manager?

Chief
ChiefFinancial
FinancialOfficer
Officer

Treasurer Comptroller

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Ownership vs. Management

Difference in Information Different Objectives

Stock prices and returns Managers vs.

Issues of shares and stockholders
other securities Top mgmt vs. operating
Dividends mgmt
Financing Stockholders vs. banks
and lenders

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Financial Markets

Money

Primary
Markets

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Financial Markets

Money

Primary
Markets
Secondary
Markets
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Financial Markets

Money

Primary OTC
Markets Markets
Secondary
Markets
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Financial Institutions
Company

Obligations
Funds

Intermediaries
Banks
Insurance Cos.
Brokerage Firms
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Financial Institutions
Intermediaries

Obligations
Funds

Investors
Depositors
Policyholders
Investors
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