MindMap Gallery A partial review of the basic principles of financial management
The basic principles of financial management are partially sorted out, including the organizational form of the enterprise, the main content of financial management, and the basic functions of financial management.
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This is a mind map about bacteria, and its main contents include: overview, morphology, types, structure, reproduction, distribution, application, and expansion. The summary is comprehensive and meticulous, suitable as review materials.
This is a mind map about plant asexual reproduction, and its main contents include: concept, spore reproduction, vegetative reproduction, tissue culture, and buds. The summary is comprehensive and meticulous, suitable as review materials.
This is a mind map about the reproductive development of animals, and its main contents include: insects, frogs, birds, sexual reproduction, and asexual reproduction. The summary is comprehensive and meticulous, suitable as review materials.
Basic principles of financial management
one
The organizational form of the enterprise
Sole proprietorship
partnership
joint liability
Difficulty in transfer
corporate system
advantage
Unlimited renewal
Easy to transfer
Limited Liability
shortcoming
double taxation
High cost of establishment
agency problem
Main contents of financial management
Long-term investment
The subject is a company
direct investment
The object is operating assets
Portfolio Principles
The purpose is to obtain the physical resources needed for business activities
fixed assets
Use it to earn operating profit rather than sales proceeds
Subsidiaries
Increase business value rather than receive dividends
Industry differences
long term financing
The subject is a company
The object is long-term capital
include
equity capital
Long-term bonds & long-term borrowings
dividend distribution
internal funding decisions
retained earnings
The purpose is to meet long-term capital needs
capital structure decisions
Determine the direction of cash flow
Dividend distribution decision
Differences in business organization types
working capital
Classification
invest
How much inventory, how much receivables, etc.
raise funds
How much short-term capital to borrow, whether to purchase on credit, etc.
Target
Current assets: Marginal benefit > Marginal cost
Financing method: reducing capital costs
Accelerate working capital turnover
as little working capital as possible
revenue
Ability to pay
Cash flow is closely related
It depends on both the industry and the type of organization.
Basic functions of financial management
financial analysis
comparative analysis
ratio analysis
trend analysis
finance prediction
financial decisions
financial plan
two
basic goals
profit maximization
Not consider
time
Capital amount
risk
Maximize earnings per share
Not consider
time
risk
Maximize shareholder wealth
Increase in market value of stockholders’ equity
Maximize Enterprise Value
Assume debt value remains constant
Stakeholders
Shareholder value is residual value
Operators
Target
increase remuneration
Increase leisure time
avoid risk
violate
Moral Hazard
Not trying your best
adverse selection
Deviating from shareholder objectives
measure
supervise
Comprehensive supervision is costly
audit
excitation
creditor
shareholder
Invest in high-risk projects
Issue new debt
measure
Include restrictive clauses in loan contracts
found, refused further cooperation
other
contract stakeholders
Non-contractual. . . . .
three
Core idea
net present value
cash, cash flow
present value, discount rate
Discount Rate
required rate of return
capm capital asset pricing model
capital cost
financing costs
capital costs
Four
Basic theory
cash flow theory
free cash flow
value appraisal theory
Intrinsic Value
net value added
value assessment model
William. sharp
capital asset pricing model
Risks are divided into two categories
Dispersible
Not dispersed
portfolio theory
Markowitz
Mean-variance analysis
Diversification reduces risk
mean represents return
Variance represents risk
capital structure theory
MM theory
trade-off theory
agency theory
orderly financing theory
five
The basic principle
About the competitive environment
self-interested behavior principle
in accordance with
rational economic man hypothesis
application
principal-agent theory
opportunity cost
extend
Information transmission principle
Principles of bilateral transactions
concept
Anticipate the other person's reaction
Consider the existence of the other party when trading
Focus on tax implications
in accordance with
Zero-sum game
Information asymmetry
Information transfer principle
concept
Actions convey information
more convincing than a statement
Request consideration of the message the action may convey
guiding principles
concept
When all else fails
Problems with understanding
High cost of analysis
Find a role model to guide you
Can't be the best, can avoid the worst
application
Industry standard concepts
Capital structure choice
real estate valuation
Follow the banker for free (hitchhiking)
Principles of value creation
valuable creative principles
Creativity can earn extra rewards
Long-term competitive advantage through a series of short-term advantages
principle of comparative value advantage
in accordance with
division of labor theory
application
Make the best use of people and resources
Complementary advantages
Mergers, joint ventures, etc.
Option principle
rights without obligations
have economic benefits
widely exist
should be considered
net benefit principle
The value of a decision is the net benefit it adds compared to alternatives
Commonly used cash flow measurements
application
Gap analysis
Sunk costs
Principles concerning financial transactions
risk-reward trade-off principle
The principle of investment diversification
in accordance with
Markowitz-portfolio theory
Can also be used in various company decisions
The principle of efficient capital market
concept
Prices reflect all available information
Able to make quick adjustments in the face of new information
Require
Pay attention to the market's valuation of enterprises
Use financial instruments with caution
Only rewards commensurate with investment risk
Difficult to increase shareholder wealth
time value of money principle
application
present value concept
Receive early and pay later
six
Financial Instruments and Financial Markets
Financial instrument type
Fixed income securities
Low correlation with the issuer’s financial condition
equity securities
Derivative securities
Hedging
transfer risk
No speculation allowed
financial market types
1
currency market
capital market
Bank medium and long-term deposit and loan market
securities market
2
debt market
equity market
3
primary market
Investment bank underwriting
The issuer has access to all of the scheduled capital
Secondary market
4
In the field
off court
financial market functions
basic skills
capital financing
risk allocation
Additional features
price discovery
mediating economy
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