PowerPoint to accompany Chapter 1 The role and environment of managerial finance Copyright © 2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442518193/ Gitman et al / Principles of Managerial Finance / 6th edition Learning Goals: Define finance. Define the managerial finance function and its relationship to economics and accounting. Identify the primary activities of the financial manager within a firm. Explain the goal of the firm, corporate governance, the role of ethics and the agency issue. Understand the financial institutions and markets and the role they play in managerial finance. Discuss business taxes and their importance in financial decisions. Copyright © 2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442518193/ Gitman et al / Principles of Managerial Finance / 6th edition Finance and Business Finance: the art and science of managing money. Two broad areas: – Financial Services: the design and delivery of advice and financial products to individuals, business and government. – Managerial Finance: the duties of the financial manager in the business firm. Copyright © 2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442518193/ Gitman et al / Principles of Managerial Finance / 6th edition Legal forms of business ownership: – Sole Trader: A business owned by one person and operated for his or her own profit – Partnership: A business operated by two or more people together for a profit. – Corporation: An intangible business entity created by law and is a separate ‘entity’ to its owners. Finance and Business Copyright © 2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442518193/ Gitman et al / Principles of Managerial Finance / 6th edition Finance and Business Strengths of the basic legal forms of business organisation Table 1.1, page 6. Copyright © 2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442518193/ Gitman et al / Principles of Managerial Finance / 6th edition Finance and Business Weaknesses of the basic legal forms of business organisation Table 1.1, page 6. Copyright © 2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442518193/ Gitman et al / Principles of Managerial Finance / 6th edition Career opportunities in managerial finance: table01-02.jpg – Financial Analyst – Capital Expenditure Manager – Project Finance Manager – Cash Manager – Credit Analyst/Manager – Pension Fund Manager – Foreign Exchange Manager Finance and Business Copyright © 2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442518193/ Gitman et al / Principles of Managerial Finance / 6th edition The Managerial Finance Function Organisation of the finance function: – Is dependent upon the size of the organisation. – In large organisations the CFO is assisted by the: ● Treasurer: responsible for the firm’s financial activities ● Controller: responsible for the firm’s accounting activities. Copyright © 2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442518193/ Gitman et al / Principles of Managerial Finance / 6th edition Closely related to and often overlaps with two allied fields: – Economics – Accounting Two key differences between accounting and finance: – Emphasis on cash flows – Decision making The Managerial Finance Function Copyright © 2011 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442518193/ Gitman et al / Principles of Managerial Finance / 6th edition Emphasis on cash flows: – Finance Managers: Focus is on cash flow and maintaining solvency. [Accounts are prepared on a cash basis] – Accounting Managers: Focus is on financial statement preparation and paying taxes. [Accounts are prepared on an accruals basis] The Managerial Finance Function