Chapter 1
Getting
Started—
Principles of
Finance
Slide Contents
• Learning Objectives
• Introduction
1.
2.
3.
4.
Finance: An Overview
Three Types of Business Organizations
The Goal of the Financial Manager
The Five Basic Principles of Finance
• Key Terms
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Learning Objectives
1. Understand the importance of finance in
your personal and professional lives and
identify the three primary business
decisions that financial managers make.
2. Identify the key differences between the
three major legal forms of business.
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Learning Objectives (cont.)
3. Understand the role of the financial
manager within the firm and the goal for
making financial choices.
4. Explain the five principles of finance that
form the basis of financial management for
both businesses and individuals.
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1.1 FINANCE:
AN OVERVIEW
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What is Finance?
• Finance is the study of how people and
businesses evaluate investments and raise
capital to fund them.
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Three Basic Questions Addressed by
the Study of Finance:
1. What long-term investments should the
firm undertake?
2. How should the firm raise money to fund
these investments?
3. How can the firm best manage its cash
flows as they arise in its day-to-day
operations?
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Why Study Finance?
• Knowledge of financial tools is critical to
making good decisions in both corporate
world and personal lives.
– How will GM’s strategic decision to invest $740
million to produce the Chevy Volt require the
expertise of different disciplines within the
business school?
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