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