LEARNING GOALS

2

THE ROLE

AND ENVIRONMENT

OF MANAGERIAL FINANCE

CHAPTER

Across the Disciplines WHY THIS CHAPTER MATTERS TO YOU

Accounting:You need to understand the relationships
between the firm’s accounting and finance functions; how the
financial statements you prepare will be used for making
investment and financing decisions; ethical behavior by those
responsible for a firm’s funds; what agency costs are and why
the firm must bear them; and how to calculate the tax effects of
proposed transactions.

Information systems:You need to understand the organization
of the firm; why finance personnel require both historical and
projected data to support investment and financing decisions;
and what data are necessary for determining the firm’s tax
liability.

Management:You need to understand the legal forms of busi-
ness organization; the tasks that will be performed by finance

personnel; the goal of the firm; the issue of management com-

pensation; the role of ethics in the firm; the agency problem;

and the firm’s relationship to various financial institutions and

markets.

Marketing:You need to understand how the activities you pur-

sue will be affected by the finance function, such as the firm’s

cash and credit management policies; the role of ethics in pro-

moting a sound corporate image; and the role the financial mar-

kets play in the firm’s ability to raise capital for new projects.

Operations:You need to understand the organization of the

firm and of the finance function in particular; why maximizing

profit is not the main goal of the firm; the role of financial insti-

tutions and markets in providing funds for the firm’s production

capacity; and the agency problem and the role of ethics.

Explain why wealth maximization, rather than

profit maximization, is the firm’s goal and how the

agency issue is related to it.

Understand the relationship between financial

institutions and markets, and the role and opera-

tions of the money and capital markets.

Discuss the fundamentals of business taxation of

ordinary income and capital gains, and explain

the treatment of tax losses.

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LG

LG

Define finance,the major areas of finance

and the career opportunities available in this

field, and the legal forms of business

organization.

Describe the managerial finance function

and its relationship to economics and

accounting.

Identify the primary activities of the financial

manager within the firm.

LG

LG

LG

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