 The average American uses 35 paper clips per year  Almost all paper clips used by Americans are made in the USA  Why? – There is over a 100% tariff on paper clips  Interestingly plastic-covered clips are not covered by the tariff and they are manufactured largely in China 1

The savings of the Steen method over the block method would be nearly seven minutes. This savings could be as much as $110,000,000 annually per carrier—well over a billion dollars for the industry— and likely could be more given the parallel nature of the boarding process. 2

3

4

The Role and Objective of Financial Management

 What is the number one goal of any financial manager? 6

 Will a particular investment be successful?  Where will the funds come from to finance the investment?  Does the firm have adequate cash or access to cash to meet its daily operating needs? 7

 Considers the timing and risk of the benefits from stock ownership  Determines that a good decision increases the price of the firm’s common stock (C/S)  Is an impersonal objective  Is concerned for social responsibility  Why? 8

9 Shareholder Wealth Maximization (SWM) NOT NOT Profit maximization! Primary objective of the financial manager Primary objective of financialmanagement

 Are stockholders, managers, and creditors always in agreement regarding company decisions?  Why? 10

 According to Adam Smith we are all greedy, but it is this greed that when properly incentivized can bring about a blanket of altruism.  What is the problem with the above statement?  Conflicts between stockholders and managers.  Conflicts between stockholders and creditors. 11

 What conflicts can exist?  How can we mitigate these conflicts? (flip)  Tie bonus/options to EVA  Options to buy stock or actual shares of stock to reward long-term performance  American Funds  Shareholder intervention  Any shareholder who owns $1,000 of a company’s stock for one year can sponsor proposals that must be voted on at the annual stockholders’ meeting.  Pension fund managers must proxy vote as a fiduciary for their stake holders 12

 What conflicts can exist?  Creditors have a claim on the firm’s earnings stream, and they have a claim on its assets in the event of bankruptcy, however; stockholders have control of the firms managers. 13

 Sole proprietorship  Partnership  Corporation 14

 Owned by one person  Advantage: Easy formation  Disadvantage: Unlimited liability  Disadvantage: Difficulty raising funds  Represent 75 percent of all businesses  Account for less than 6 percent of total business revenues 15

 Owned by two or more persons  About 7 percent of US businesses, 5 percent of business revenues  Classified as general (unlimited liab) or limited  General Partnerships represent 90% of partnerships  Advantage: Limited partners’ liability is limited to what is specified in the agreement.  Disadvantage: Partnership dissolves when a general partner dies  Disadvantage: Unlimited liability for general partners 16

 Limited liability  Permanency  Ability to raise capital  Has a board of directors  Owners are stockholders  Double taxation  X-inefficiency  Flexibility  Legal entity  Easy marketability of shares of ownership  Higher agency costs 17 Advantages Disadvantages

 S – Corp  Must have < 75 employees  Allows limited liability  Avoids double taxation  LLC  Same advantages of an S-Corp with fewer restrictions of ownership  LLP  LLC’s for companies who issue professional advice 18

19

 Board of directors deals with broad policy  The board sets 3 to 5 year strategic plans  Management makes most of the decisions  Management makes day-to-day decisions following the strategic plan 20

 Dividends  Asset  Voting for board members, major policy  Preemptive rights on new shares 21

 Financial Executive Institute  Institute of Charted Financial Analysis  Financial Management Association  Institute of Management Accounting 22

 VP of Finance  Director Investor Relations  Assistant Treasurer  Tax Manager  Financial Analyst  Account Executive Security Broker  Financial Planner  Banking 23 Check out