The average American uses 35 paper clips per year

Almost all paper clips used by Americans are made in the USA Why? – There is over a 100% tariff on paper

clips Interestingly plastic-covered clips are not

covered by the tariff and they are manufactured largely in China

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The savings of the Steen method over the block method would be nearly seven minutes. This savings could be as much as $110,000,000 annually per carrier—well over a billion dollars for the industry— and likely could be more given the parallel nature of the boarding process.

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The Role and Objective of

Financial Management

What is the number one goal of any financial manager?

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Will a particular investment be successful?

Where will the funds come from to finance the investment?

Does the firm have adequate cash or access to cash to meet its daily operating needs?

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Considers the timing and risk of the benefits from stock ownership

Determines that a good decision increases the price of the firm’s common stock (C/S)

Is an impersonal objective Is concerned for social responsibility

Why?

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ShareholderShareholderWealthWealthMaximizationMaximization

(SWM)(SWM)

NOTNOTProfit maximization!

Primary objective of the Primary objective of the financial managerfinancial manager

Primary objective ofPrimary objective offinancial financial

managementmanagement

Are stockholders, managers, and creditors always in agreement regarding company decisions?

Why?

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According to Adam Smith we are all greedy, but it is this greed that when properly incentivized can bring about a blanket of altruism. What is the problem with the above

statement?

Conflicts between stockholders and managers.

Conflicts between stockholders and creditors.

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What conflicts can exist? How can we mitigate these conflicts? (flip)

Tie bonus/options to EVA Options to buy stock or actual shares of stock

to reward long-term performance American Funds

Shareholder intervention Any shareholder who owns $1,000 of a company’s

stock for one year can sponsor proposals that must be voted on at the annual stockholders’ meeting.

Pension fund managers must proxy vote as a fiduciary for their stake holders

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What conflicts can exist? Creditors have a claim on the firm’s earnings

stream, and they have a claim on its assets in the event of bankruptcy, however; stockholders have control of the firms managers.

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Sole proprietorship

Partnership

Corporation

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Owned by one person Advantage: Easy formation Disadvantage: Unlimited liability Disadvantage: Difficulty raising

funds Represent 75 percent of all

businesses Account for less than 6 percent of

total business revenues

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Owned by two or more persons About 7 percent of US businesses, 5

percent of business revenues Classified as general (unlimited liab) or

limited General Partnerships represent 90% of

partnerships Advantage: Limited partners’ liability is

limited to what is specified in the agreement.

Disadvantage: Partnership dissolves when a general partner dies

Disadvantage: Unlimited liability for general partners

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Limited liability Permanency Ability to raise

capital Has a board of

directors Owners are

stockholders

Double taxation X-inefficiency

Flexibility Legal entity Easy

marketability of shares of ownership

Higher agency costs

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Advantages

Disadvantages

S – Corp Must have < 75 employees Allows limited liability Avoids double taxation

LLC Same advantages of an S-Corp with fewer

restrictions of ownership LLP

LLC’s for companies who issue professional advice

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Board of directors deals with broad policy

The board sets 3 to 5 year strategic plans

Management makes most of the decisions

Management makes day-to-day decisions following the strategic plan

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Dividends

Asset

Voting for board members, major policy

Preemptive rights on new shares

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Financial Executive Institute

Institute of Charted Financial Analysis

Financial Management Association

Institute of Management Accounting

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VP of Finance

Director Investor Relations

Assistant Treasurer

Tax Manager

Financial Analyst

Account Executive Security Broker

Financial Planner

Banking 23Check out http://www.careerpath.com/