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Prepared by:
Terry Fegarty
Seneca College
Chapter 1 - Outline
Definition of Financial Management
The Field of Finance
The Economic Environment
The Evolution of Finance
The Goals of Financial Management
A Risk-Return Trade-Off
Functions and Activities of Financial Management
Forms of Organization
Financial Markets
Interest Rates
Summary and Conclusions
© 2003 McGraw-Hill Ryerson Limited
PPT 1-3
Profitability Risk
Profitability Risk
Risk
Disadvantages
Advantages
Unlimited
Freedom Liability
The business does not
Simplicity continue if the owner
Lackdies
of Continuity
or becomes
incapacitated since they
Low Start Up
Difficulty in
are treated as one and
Costs A business owned by Raising
the same. Upon the
Money
owner’s death, the
one person business is liquidated
Tax Benefits and becomes part of his
Reliance on One
personal Person
estate..
© 2003 McGraw-Hill Ryerson Limited
Forms of Organization: PPT 1-12
Partnerships
Disadvantages Advantages
Unlimited Liability
Lack of Continuity More Capital
Ownership
Greater Talent Pool
Transfer
Difficult
Ease of Formation
Possibility of Tax Benefits
Conflict
A business venture with two or more owners
© 2003 McGraw-Hill Ryerson Limited
Forms of Organization: PPT 1-13
Corporations
Advantages Disadvantages
Limited Liability Potential Shareholder
Revolts
Continuity
Higher Start-Up
Greater Likelihood Costs
of Professional
Management Regulation
Double Taxation
Easier Access to A corporation
Money is a separate legal entity
© 2003 McGraw-Hill Ryerson Limited
PPT 1-14