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Summary Principles of Managerial Finance

- Gitman
236 Flashcards & Notes
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A snapshot of the summary - Principles of Managerial Finance Author: Gitman

  • 1 Introduction to managerial finance

  • 1.2 Goal of the Firm

  • Def. risk averse
    Requiring compensation to bear risk
  • 1.3 Managerial Finance Function

  • The treasurer and the controller are reporting to the CFO. What is a treasurer?
    The firms Chief financial manager, who manages the firm's cash, oversees its pension plans, and manages key risks.
  • The foreign exchange managers typically report to the firm's treasurer, what are they doing exactly?
    The manager responsible for managing and monitoring the firm's exposure to loss from currency fluctuations.
  • Two basic differences between finance and accounting;
    one is related to the emphasis on cash flows and the other to decision making.
  • Accountant uses accrual basis, what is accrual basis
    In preparation of financial statements, recognizes revenue at the time of sale and recognizes expenses when they are incurred.
  • Financial manager uses the cash basis, what is that?
    Recognizes revenues and expenses only with respect to actual inflows and outflows of cash.
  • 1.4 Governance and Agency

  • What are individual investors?
    Investors who own relatively small quantities of shares so as to meet personal investment goals.
  • What are institutional investors?
    Investment professionals, such as banks, insurance companies, mutual funds, and pension funds, that are paid to manage and hold large quantities of securities on behalf of others.
  • When do agency problems occur
    when managers place personal goals ahead of the goals of shareholders
  • When do agency cost arise?
    From agency problems that are borne by shareholders and represent a loss of shareholders wealth.
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