Finance 301

Corporate finance is important to all managers because it provides managers the skills needed to identify and select the corporate strategies and individual projects that add value to their firm and forecast the funding requirements of their company and devise strategies for acquiring those funds.

Corporate finance is important to all managers because it allows a manager to be able to predict the funds the company will need for their upcoming projects and think about ways to organize and acquire those funds.

Common stockholders are the basic owners of a corporation, but few stockholders of large corporations take an active role in management. Instead, they elect the corporation’s board of directors to represent their interests. Board members seldom get involved in the day-to-day management of the company. They establish the basic mission and goals of the corporation and appoint

Free cash flow - Cash remaining from operating activities after adjusting for capital expenditures and dividends paid. Full disclosure principle - Accounting principle that dictates that companies disclose circumstances and events that make a difference to financial statement users. Generally accepted accounting

A. Corporate finance is important to all managers because it helps identify the goals of the company. These goals are:

Comparative balance sheets, a current income statement, and certain transaction data all provide information necessary for preparation of the statement of cash flows. Comparative balance sheets indicate how assets, liabilities, and

grow at the current rate. This is because a company must make capital expenditures to continue to exist

According to Gitman, the goal of the firm, and therefore of all managers and employees, is to maximize the wealth of the owners for whom it is being operated (2009). The financial manager is responsible for acquiring sources of financing and allocate amongst competitive investment alternatives. The ultimate goal is to invest in projects yielding higher returns than amount of financing used to invest, so profits can be used satisfy claims and increase shareholder wealth. The issues facing financial managers are therefore to 1) increase sources of financing from investors and 2) increase shareholder wealth while maintaining a

Free cash flow is the cash remaining from operations which indicates the company’s ability to generate cash. In this case Hershey has a much higher free cash flow amount which indicates they have a higher ability to generate cash. This calls into question Tootsie Rolls ability to repay long-term obligations.

Board of Directors – are responsible for overseeing the activities of Innovative Widgets so that the company meets the expectations of our founder.

Joshua Kennon (2007), stated that “The board of directors is the highest governing authority within the management structure at any publicly traded company and is usually made up of the directors who are elected for a specific number of years by the shareholders”. According to Wikipedia,” A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization”.

A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products, make acquisitions, pay dividends and reduce debt.

The free cash flow method is used to gauge “a company’s cash flow beyond that necessary to grow at the current rate… [to ensure companies] make capital expenditures to continue to exist and to grow” (Drake, n.d.). Calculation of free cash flows utilizes various components, including a firm’s value, cash flow forecasts, a firm’s capital structure, the cost of capital, and/or discounted cash flows.

* A broader capital base gives the company more access to credit which gives the company an option to venture into new business opportunities

The Board of Directors are in charge of determining the corporation’s leadership structure on an annual basis and determine if the board will be led by an independent Chairperson or an independent Lead Director. The board has decided that Ronald Sargent, the CEO of Staples, will remain and the Chairman of the board. The Board of Directors is broken down into five committees made up of around three or four board members. Each committee has there own responsibilities and are in charge of making critical decisions that they must assure is communicated properly throughout the entire company. This leadership structure assures that the Board of Directors has a proper balance of leadership roles that allows for a system that prevents any conflict of interests that may come from having the CEO serving on the board.