A S L 3 Lecture Notes - Lecture 8: Capital Structure, Stock Market, Modern Portfolio Theory
Document Summary
Understanding finance theory and practice fn243 introduction. Lecutre introductory concepts: financail decision making, the finance function, profit vs cash, the principal-agent relationship. Financial decision making: how management within companies should make financial decisions but the real world is different so we shall examine how financial decisions are made. In essence all decisions are based on the concept of the comparison of alternatives: and in finance, all alternatives have to be valued in order to be compared. So, the valuation base that is employed is of great importance: the valuation base in this course is based on the context of capitalism and the competitive market economy. The decision objective: why do companies exist, to benefit their owners (this is the fundamental rationale , so, management"s objective should be to take decisions benefiting their owners, and in fact maximizing this benefit. Time dimesions: long capital gain run, maximise profits.
