FTC finance class
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Transcript of FTC finance class
CORPORATE FINANCE
The Corporation
FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA 1
CORPORATE FINANCE
WelcomeBio
Contact info
FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA 2
CORPORATE FINANCE
Ice Breaking!FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA 3
CORPORATE FINANCE
Let’s review our course syllabus!
FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA 4
5FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONWhy study Corporate Finance?
An understanding of why and how financial decisions are made is essential.
The focus on this course is to understand and learn …
how to make optimal corporate financial decisions.
how a corporation is structured and its related business forms.
how is the role of financial managers in making financial decisions for the firm.
how the decision making of financial managers requires information (firm’s fin. statements).
6FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONSPECIFIC CONTENT OBJECTIVES
UPON COMPLETION OF THIS WORKSHOP, THE STUDENT WILL BE ABLE TO:
1.List and define the four major types of firms in the U.S.; describe major characteristics of each type, including the means for distributing income to owners.
2.Distinguish between limited and unlimited liability, and list firm types that are subject to each type of liability.
7FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONSPECIFIC CONTENT OBJECTIVES
3. Understand the difference between a Public and a Private Company.4. Understand the difference between a Primary and a Secondary Market.5. Discuss the division of corporate ownership into shares of stock.
8FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONTHE FOUR TYPES OF FIRMS
• Sole Proprietorship
• Partnership
• Limited Liability Company (LLC)
• Corporation (Corp.)
9FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONTHE FOUR TYPES OF FIRMS
Video: Types of Businesseshttp://www.youtube.com/watch?v=gQkjdbHqGaQ
Activity: Scaffolding activity (groups of 3 students) using a Chart/Matrix diagram to describe the business characteristics, similarities, and differences. You all have 10’; then you will teach each other.
10FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONTHE FOUR TYPES OF FIRMS
AS OF 2013 IN THE U.S.
Source: www.bizstats.com
11FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONTHE FOUR TYPES OF FIRMS (CONT.)
Sole Proprietorship
• Business is owned and run by one person
• Typically has few, if any, employees
• AdvantagesEasy to create
• DisadvantagesUnlimited personal liabilityLimited life
12FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONTHE FOUR TYPES OF FIRMS (CONT.)
Partnership
• Similar to a sole proprietorship, but with more than one owner
• All partners are personally liable for all of the firm’s debts. A lender can require any partner to repay all of the firm’s outstanding debts.
• The partnership ends with the death or withdrawal of any single partner.
13FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONTHE FOUR TYPES OF FIRMS (CONT.)
Limited Liability Company (LLC)
• All owners have limited liability but they
can also run the business.
• Relatively new business form in the U.S.
14FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONTHE FOUR TYPES OF FIRMS (CONT.)
Corporation A legal entity separate from its owners.
• Has many of the legal powers individuals have such as the ability to enter into contracts, own assets, and borrow money.
• The corporation is solely responsible for its own obligations. Its owners are not liable for any obligation the corporation enters into.
15FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONTHE FOUR TYPES OF FIRMS (CONT.)
Corporation Ownership.
• Represented by shares of stock.
• Owner of stock is called: Shareholder; Stockholder; or Equity Holder.
• Sum of all ownership value is called equity.
• Owner is entitled to dividend payments.
16FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATION
Ownership versus Control of Corporations
Financial Manager
Responsible for:
• Investment Decisions
• Financing Decisions
• Cash Management
17FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONOwnership versus Control of Corporations
Financial Manager
Activity: Scaffolding activity (groups of 3 students) using the 5 W’s diagram.
Article: “Ten tips for leading companies out of crisis,” (Yakola, 2014).http://www.mckinsey.com/insights/corporate_finance/ten_tips_for_leading_companies_out_of_crisis
In groups, analyze the Five W's (Who, When, Where, What, and Why) to evaluate this paper.
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THE CORPORATION
Ownership versus Control of Corporations
Goal of the Firm
Shareholders will agree that they are better off if management makes decisions that maximizes the value of their shares.
FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
19FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATION
The Stock Market
• Public Company
Stock is traded by the public on a stock exchange.
• Private Company
Stock may be traded privately.
20FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONThe Stock Market (cont.)
• Primary Markets
When a corporation itself issues new shares of stock and sells them to investors, they do so on the primary market.
• Secondary Markets
After the initial transaction in the primary market, the shares continue to trade in a secondary market between investors.
21FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATION
The Stock Market (cont.)
Video: Types of Common Stockhttp://www.youtube.com/watch?v=Hca0PMDv6WA
Activity: use a Y-Chart diagram to analyze
and describe, with respect of
3 variables, a Common Stock.
22FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATION
The Stock Market (cont.)Largest Stock Markets (Volume of shares
and Value of domestic corporations)
• New York Stock Exchange (NYSE)Market Makers/Specialists
Each stock has only one market maker
• NASDAQDoes not meet in a physical locationMay have many market makers for a single stock
• London Stock Exchange and Tokyo Stock Exchange
23FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATION
Worldwide Stock Markets Ranked by Two Common Measures as of 2013
Source: www.world-exchanges.org
24FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATION
Vocabulary
• NASDAQ• NYSE• CEO-Chief Financial Officer• Partnership• Primary Market• Private Companies• Public Companies
25FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATION
Vocabulary
• “S” corporation• Secondary Market• Shareholder• Sole proprietorship• Stock• Stock Market (or Stock Exchange)• Stockholder
26FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATION
Q & A
27FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONAssessment - Chapter Quiz
1. What are the four types of firms?2. What type of firm generates most revenue
in the United States?3. What are the advantages and
disadvantages of a Sole Proprietorship?4. What is the number 1 stock market based
on total volume of transactions worldwide?5. What is the number 1 stock market based
on total value of transactions worldwide?6. Multiple choice questions7. T – F questions
28FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATIONReferences
Berk, J. & DeMarzo, P. (2014). Corporate Finance: The Core. 3rd ed. Boston, MA: Pearson Prentice Hall.ISBN: 978-0-13-299247-3
Enchanted Learning.com. (2003). Graphic Organizers. Retrieved from http://www.enchantedlearning.com/graphicorganizers
The Brandow Company. (2012). The Four Types of Firms. Retrieved from www.bizstats.com
Yakola, D. (2014). Ten tips for leading companies out of crisis. Retrieved from http://www.mckinsey.com/insights/corporate_finance/ten_tips_for_leading_companies_out_of_crisis
World Federation of Exchanges. (2014). Worldwide Stock Markets Ranked by Two Common Measures. Retrieved from www.world-exchanges.org/statistics
29FTC Pembroke Pines - Corporate Finance - Manuel Christiansen, MBA
THE CORPORATION
Thank you all and I will see you on our next class!