【正文】 rally responsible for the liabilities incurred by the partnership. Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 19 Organisational Forms ?Sole proprietorships ?Partnerships ?Companies Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 17 Risk and Returns Risk Expected Returns Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 15 ? In order to lessen the agency problem, some panies have adopted practices such as issuing stock options (share options) to their executives. Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 13 Agency problem The agency problem refers to the fact that a firm’s managers will not work to maximise benefits to the firm’s owners unless it is in the managers’ interest to do so. This problem is the result of a separation of the management and ownership of the firm. Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 11 Shareholder wealth maximisation? Same as: 1. Maximising firm value 2. Maximising share values Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 9 Financial Goal of the Firm Profit maximisation? In microeconomics courses profit maximisation is frequently given as the financial goal of the firm. Profit maximisation functions largely as a theoretical goal. Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 7 Chief Accountant Corporate Treasurer Typical Finance Structure Chief Financial Officer Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 5 ? After World War Ⅱ the emphasis of corporate finance switched from financial accounting and external reporting to cost accounting and reporting and financial analysis on behalf of the firm?s managers. ? That is, the perspective of finance changed from reporting only to outsiders to that of an insider charged with the management and control of the firm?s financial operations. Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 3 ? At the turn of the twentieth century financial topics focused on the formation of new panies and their legal regulation and the process of raising funds in the capital markets. ?The pany?s secretary was in charge of raising funds and producing the annual reports, as well as the accounting function. Copyright 169。 3 Scope and environment of financial management Copyright 169。Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 1 chapter 1 amp。 2022 Pearson Education Australia Pty Limited Slide: 1 2 Development of Financial Management Early 20th century: Concentrated on reporting to outsiders. Early 21st century: Insiders managing and controlling the firm’s financial operations. Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 4 ? Business failures during the Great Depression of the 1930s helped change the focus of finance. ? Increased emphasis was placed on bankruptcy, liquidity management and avoidance of financial problems. Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 6 ? Capital budgeting became a major topic in finance. ? This led to an increased interest in related topics, most notably firm valuation. ? Interest in these topics grew and in turn spurred interest in security analysis, portfolio theory and capital structure theory. Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 8 ? Chief accountant is also called financial controller, whose responsibilities include financial reporting to outsiders as well as cost and managerial accounting and financial analysis on behalf of the firm?s managers. ? Corporate treasurer is in charge of raising funds, managing liquidity and banking relationships and controlling risks. Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 10 Problems: 1. UNCERTAINTY of returns 2. TIMING of returns Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 12 It takes into account uncertainty or risk, time, and other factors that are important to the owners. But many things affect share prices. Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 14 Agency Costs The costs, such as reduced share price, associated with potential conflict between managers and investors when these two groups are not the same. Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 16 Financial Decisions and Riskreturn Relationships ? Almost all financial decisions involve some sort of riskreturn tradeoff. ? The more risk the firm is willing to assume, the higher the expected return from a given course of action. Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 18 Why Prices Reflect Value Efficient Markets Markets in which the values of all assets and securities at any instant in time fully reflect all available information. Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 20 Nature of the anisational forms ? Sole proprietorship – Owned by a single individual – Absence of any formal legal business structure – The owner maintains title to the assets and is personally responsible, generally without limitation, for the liabilities incurred. – The proprietor is entitled to the profits from the business but also absorb any losses. Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 22 ? Company – A pany may operate a business in its own right. That is, this entity functions separately and apart from its owners. – The owners elect a board of directors, whose members in turn select individuals to serve as corporate officers, including the manager and the pany secretary. – The shareholder?s liabilit