Session 1 – Overview of Corporate Finance, Chapter One

All page numbers are references to Corporate Finance: A Focused Approach 4th edition by  Ehrhardt and Brigham (South-Western, 2011)

From Chapter 1

Need to know - agency problems, advantages and disadvantages of three major forms of business organization, goal of the management is the maximize shareholder’s wealth (which is roughly equivalent to maximizing firm value and or maximizing the value of stock), three methods of capital allocation, fundamental factors that affect the cost of money. After section 1.4, focus on terms and terminology (e.g., Question 1-1), look for word pairs that are opposites (e.g. capital versus money markets).  You should read section 1.13, on the Global Financial Crisis.  But, while life will test you on the lessons from this crisis, I will not be testing you on that section.

Do not need to know - the capital formation process, business ethics and  social responsibility, economic conditions that affect the cost of money, causes of the recent financial crisis, organization of the textbook.

1.  Watch the Chapter 1 Overview.

2. Read the chapter.

3. Be able to answer Chapter 1 mini-case questions a-c, e, f, i-o (page 46).

4. Be prepared for a quiz on the material from Chapter 1.

updated January 15, 2012.