CHAPTER 1 Introduction to FinancialManagement
Chapter Outline • What is financial management? • What are the main financial decisions? • What is the goal of financial management? • What is the role of a financial manager? • What are agency problem and the control of the firm? • What about ethics?
CFO • CFO? • Apple Chief Financial Officer Peter Oppenheimer (2012) - $ 68.6 million. • Oracle Corp. CFO SafraCatz (2012) - $ 51.7 million. • Patrick Pichette, CFO at Google (2012) - $ 38.7 million.
If you were to start your own business, what kind of financial issues would you have to consider?
FinancialManagement • What long-term investments should the firm take on? • Where will we get the long-term financing to pay for the investment? • How will we manage the everyday financial activities of the firm? • How to use your profits?
Financial Management • Capital Budgeting • Capital Structure • Working Capital Management
Goal of Financial Management What might be some potential goals? (Turkcell)
Goal of Financial Management • PepsiCo ”We provide shareholders with a strong return on their investments.” • Take-Two Interactive “…other initiatives to grow its business and create shareholder value…”
Goal of Financial Management • ARX ARC Resources “…ARC's goal is to create shareholder value in the form of regular dividends and anticipated capital appreciation relating to future growth...” • Jaguar Financial Corporation “…where Jaguar determines that one or more changes could be made to create shareholder value…”
Whatabout ETHICS?ThenewTurkish Commerce CodeProfessional Ethics“An audit conducted in compliance with the professional ethics and…”“Professional ethics are both the main support of the moral legitimacy of an audit and the source of its legal responsibility…
The Agency Problem • Agency Relationship • DiffusedOwnership • Agency Costs • Shareholder/bondholder conflict
The Agency Problem • Managerial compensation • OwnershipStructure • Othermechanismsrelatedto board of directors • Apple CEO Steve Jobs: 2003-2007: $ 661KK
(OptionalTopics) • FinancialMarkets • Primary Markets vs. Secondary Markets • Listing – Borsa Istanbul • Forms of BusinessOrganizations: - Sole Proprietorship - Partnership - Corporation
References • www.bloomberg.com – 08.05.2013 • Van Horne, J. C., Wachowicz, J. M., 2008. Fundamentals of FinancialManagement 13th ed. PearsonEducationLimited. • Ross, A. R., Westerfield, R. W., Jaffe, J., 2008. CorporateFinance 8th ed. McGraw-HillBookCo. • www.pepsico.com • WirelessNews – 02/08/2013 – Factiva • CanadaStockwatch – 01/08/2013 – Factiva • Pr-inside.com – 02/08/2013 – Factiva • http://www.pwc.com.tr/en_TR/TR/publications/ttk-assets/pages/ttk-a_blueprint_for_the_future.pdf