Objectives

This lecture explores the foundations of financial management. We’ll look at the goal of the firm, possible organizational structures, and at corporate taxes. We’ll also lay out ten axioms for sound financial management. After reading this lecture, you will be able to answer the following questions.

1. Why is stockholder wealth maximization considered a better goal for the firm than profit maximization?
2. What are the three forms of business organizations?
3. What are the advantages and disadvantages of each business structure?
4. If you were the CFO of a large corporation, how would you calculate your corporation's income tax liability?
5. What are the ten axioms of financial management?