Chapter Learning Objectives:
AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO:
Describe the three major forms of business organization.
Provide a brief description of the income statement.
Provide a brief description of the balance sheet.
Provide a brief description of the statement of cash flows.
Identify the goal and functions of financial management.
Describe the agency relationships in a business organization and their implications for financial management.
Where We Have Been...
We've seen how the financial system supports the flow of funds from saving units to those who need to borrow funds or raise equity by selling shares. Financial markets, interest rates, securities prices, risk and return concerns help direct funds efficiently to their best purpose to help the global economy run as smoothly as possible. One of the biggest users of capital in the financial markets are businesses, from the entrepreneur seeking start-up financing, to the firm issuing shares for the first time in an IPO, to an exporter arranging overseas financing for a purchase. No discussion of finance is complete without a look at financial management—how business uses the financial system and markets to raise funds and direct capital to keep their firms running and to meet customer's needs.
Where We Are Going...
How a business is organized has implications on a manager's incentives. Financial statement information is valuable to investors and managers to help ...