1. FUNDAMENTALS OF CORPORATE FINANCE saklviTüal½yCatiRKb;RK g National University of Management mUldæanRKwHén hirBaØvtßúsaCIvk mµ 2011 - 2012 2011 - 2012 Lecturer : Chey Vong MBA PROGRAM

2. Corporate Finance 1 Chapter 1Introduction to Corporate Finance Chapter 2Financial Statements, Taxes, and Cash Flow Chapter 3Working with Financial Statements Chapter 4Introduction to Valuation: The Time Value of Money Chapter 5Discounted Cash Flow Valuation Chapter 6Interest Rates and Bond Valuation Chapter 7Stock Valuation Chapter 8Net Present Value and Other Investment Criteria Chapter 9Return, Risk, and the Security Market Line Chapter 10Cost of Capital Table of Contents

3. Chapter Organization Corporate Finance and the Financial Manager Corporate Finance and the Financial Manager Forms of Business Organization Forms of Business Organization The Goal of Financial Management The Goal of Financial Management The Agency Problem and Control of the Corporation The Agency Problem and Control of the Corporation Financial Markets and the Corporation Financial Markets and the Corporation Summary and Conclusions Summary and Conclusions Corporate Finance 2 Chapter 1 Introduction to Corporate Finance

4. Corporate Finance Corporate Finance Investments Investments Financial Institutions Financial Institutions International Finance International Finance Corporate Finance 3 The Four Basic Areas of Finance

5. Imagine that you were to start your own business. Imagine that you were to start your own business. No matter what type you started, you would have to No matter what type you started, you would have to answer the following three questions : answer the following three questions : What Is Corporate Finance ? 1- What long-term investments should you take on ? That is, what lines of business will you be in and what sorts of buildings, machinery, and equipment will you need ? 2- Where will you get the long-term financing to pay for your investment ? Will you bring in other owners or will you borrow the money ? 3- How will you manage your everyday financial activities such as collecting from customers and paying suppliers ? Corporate Finance 4

6. A Simplified Organizational Chart A Simplified Organizational Chart Chairman of the Board and Chief Executive Officer (CEO) Board of Directors President and Chief Operations Officer (COO) Vice President Marketing Vice President Finance (CFO) Vice President Production TreasurerController Cash Manager Credit ManagerTax Manager Cost Accounting Manager Capital Expenditures Financial Planning Financial Accounting Manager Data Processing Manager Corporate Finance 5

7. Forms of Business Organization Corporate Finance 6 Business PartnershipCorporation Proprietorship

8. The Goal of Financial Management If we were to consider possible financial goals, we might find some ideas like the following : Corporate Finance 7 Avoid financial distress and bankruptcy Beat the competition Maximize sales or market share Minimize costs Maximize profits Maintain steady earnings growth Survive

9. Agency Relationship The relationship between stockholders and management is called an agency relationship. Such a relationship exists whenever someone (the principal) hires another (the agent) to represent his/her interests. Corporate Finance 8

10. What is the role of financial markets in corporate finance? What is the role of financial markets in corporate finance? Cash flows to and from the firm Money markets and capital markets Primary vs. secondary markets How do financial markets benefit society? How do financial markets benefit society? Corporate Finance 9 Financial Markets

11. Cash Flows Between the Firm and the Financial Markets Total Value of Firm’s Assets Total Value of the Firm to Investors in the Financial Markets B. Firm invests in assets Current Assets Fixed Assets C. Cash flow from firm’s assets D. Government E. Retained cash flows A. Firm issues securities F. Dividends and debt payments Financial Markets Short-term debt Long-term debt Equity shares Corporate Finance 10 B. Firm invests In assets Current assets Fixed assets Financial Markets Short-term debt Long-term debt Equity shares

12. 1. Who performs the financial management function in the typical corporation? 2. What are the major advantages 2. What are the major advantages and disadvantages of the corporate and disadvantages of the corporate form of organization? form of organization? 3. Why is shareholder wealth 3. Why is shareholder wealth maximization a more appropriate maximization a more appropriate goal than profit maximization? goal than profit maximization? Corporate Finance 11 Quick Quiz