文档介绍：Cost and ScheduleManagementLarry M. Joseph, 2002Financial BackgroundJune 2002?LMJoseph 20023Financial Decisions of Firms?Business Firms–entities whose primary function is to produce goods andservices–they vary widely in size from part-time businesses runfrom a spare room, to giant corporations (. Mitsubishior General Motors) with hundreds of thousands ofemployees, and an even larger ownership?Strategic plans specify the business the firm is in–strategic plans may change radically over time–the firm’s business may be defined in terms of a groupof products, technologies or customersJune 2002?LMJoseph 20024Financial Decisions of FirmsThe Capital Budgeting Process–The preparation of a plan for acquiring factories,machinery, research laboratories, show rooms,warehouses, and human assets to implement thestrategic plan–The basic unit of analysis is the investment projects are identified, triaged, andimplemented in the capital budgeting processJune 2002?LMJoseph 20025Financial Decisions of FirmsThe Financing Process–Once a new set of approved projects has beenidentified, it must be financed with retained earnings,stock, bonds, et cetera–Capital structure is the amount of the firm’s marketvalue allocated to each category of issued securities. Itdetermines ownership and risk level of the firms futurecash flows–Capital structure’s unit of analysis is the firm as a whole(not an investment project )June 2002?LMJoseph 20026Separation of Ownership andManagementOwners delegate management if agency conflictshave a cost-effective resolution–professional managers have specialized skills–efficiencies of scale–diversification of owner’s portfolio–savings in the cost of information gathering–learning curve/going concern issuesJune 2002?LMJoseph 20027Goal of ManagementManagement rule: Maximize the wealth of currentshareholders–Rule depends only upon production technology, marketinterest rates, market risk premiums, and security prices–Alternative rules stat