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CORPORATE FINANCE

CHAPTER 1
Goals and Governance of the
Corporation
HAZEL JADE E. VILLAMAR
WHAT IS
CORPORATE
FINANCE?
CORPORATE FINANCE -
handling the financial
affairs of a firm.
ROLE OF CORPORATE FINANCE
INTERNAL OBJECTIVES

EXTERNAL OBJECTIVES
INTERNAL OBJECTIVES

To generate cash

To earn profit


EXTERNAL OBJECTIVE

To maximize shareholders’


wealth
FINANCIAL MANAGER’S
RESPONSIBILITIES
INVESTMENT DECISION

FINANCING DECISION
INVESTMENT DECISION

CAPITAL BUDGETING OR CAPITAL


EXPENDITURE
FINANCING DECISION
SOURCES AND AMOUNTS OF
FINANCING
REAL ASSETS vs.
FINANCIAL ASSETS
WHAT ARE THE DIFFERENT
FORMS OF BUSINESS
ORGANIZATIONS?
FINANCIAL MANAGERS IN A
CORPORATION

CHIEF FINANCIAL OFFICER

TREASURER

CONTROLLER
AGENCY PROBLEM

Managers are agents for


stockholders and are tempted
to act in their own interests
rather than maximizing value.
CORPORATE
GOVERNANCE
The laws, regulations, institutions,
and corporate practices that
protect shareholders and other
investors.
ETHICS IN
MAXIMIZING
VALUE
HOW CAN YOU MAXIMIZE
YOUR VALUE?
REPUTATION
END OF CHAPTER 1