Solution

Principles of Managerial Finance Solution

Lawrence J. Gitman

PART 1

Introduction to

Managerial

Finance

CHAPTERS IN THIS PART

1

The Role and Environment of Managerial Finance

2

Financial Statements and Analysis

3

Cash Flow and Financial Planning

INTEGRATIVE CASE 1:

TRACK SOFTWARE, INC.

CHAPTER 1

The Role and Environment

of Managerial Finance

INSTRUCTOR’S RESOURCES

Overview

This chapter introduces the student to the field of finance and explores career opportunities in both financial

services and managerial finance. The three basic legal forms of business organization (sole proprietorship,

partnership, and corporation) and their strengths and weaknesses are described, as well as the relationship between

major parties in a corporation. The managerial finance function is defined and differentiated from economics and

accounting. The chapter then summarizes the three key activities of the financial manager: financial analysis and

planning, investment decisions, and financing decisions. A discussion of the financial manager's goals –

maximizing shareholder wealth and preserving stakeholder wealth – and the role of ethics in meeting these goals

is presented. The chapter includes discussion of the agency problem – the conflict that exists between managers

and owners in a large corporation. Money and capital markets and their major components are introduced in this

chapter. The final section covers a discussion of the impact of taxation on the firm's financial activities.

PMF DISK

This chapter's topics are not covered on the PMF Tutor, PMF Problem-Solver, or the PMF Templates.

Study Guide

The following Study Guide example is suggested for classroom presentation:

Example

1

3

Topic

Earnings per share

Income tax calculation

3

Chapter 1 The Role and Environment of Managerial Finance

ANSWERS TO REVIEW QUESTIONS

1-1

Finance is the art and science of managing money. Finance affects all individuals,...