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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,...