The first chapter, introduction to financial management, is an influential and foundational topic. The Fundamentals of Financial Management book has over 3000 citations on Google Scholar. In my first year of college, I’m not taking any Finance courses yet. That is why this abundant information is applicable to my future studies in Finance. Reading and writing about this gets me engage in my major beforehand. It also helps me to acknowledge terms and broad information about the finance industry. the first chapter in the book describes how finance is related to the overall business.
Firstly, the authors explain that finance is generally divided into three areas: financial management, capital markets, and investments. Investments include security analysis, portfolio theory, and market analysis. The chapter also discusses different forms of business and organization and shows different jobs in the business which employ finance students. They work in banking, investments, insurance, corporations, and the government. Additionally, in most business and organizations, the highest ranking individual is chairperson. Chief Executive Officer ( CEO ) comes next. Below CEO is Chief Operating Officer who is also known as the firm’s president. The third-ranking person is Chief Financial Officer, who is in charge of accounting, financing, credit policy, decisions regarding asset acquisitions, and investor relations. Besides, the chapter points out advantages and disadvantages in basic forms of business organization include sole proprietorship, partnerships, corporations, and limited liability companies and limited liability partnerships. Then, management’s goal in corporations is to maximize the shareholder wealth as well as the value of stock in the true and long-run value. What determines successful investors and unsuccessful investors is estimating intrinsic values, and it is also what security analysis about. The chapter by Brigham and Houston shows the importance of business ethics and gives evidence about the consequences of unethical behavior. It also gives examples of companies that had unethical behaviors and how should employees deal with them. Additionally, it is known that a consistent long-run maximization goes with socially responsible value. Moreover, the chapter identifies the potential conflicts that arise between stockholders and bondholders and explains techniques which firms can use to mitigate those conflicts. (Brigham & Houston, 2012).
In conclusion, the book brings out great information of financial management and overall knowledge about finance, especially for a student who has not taken any finance course like me. Additionally, understanding business ethics with me is the most important in business. A problem should be considered throughout four lenses of business ethics include duties, fair systems, goals, and virtues. Considering in one lense of business ethics will lead to bad consequences for the business, the employers and even employees.
Source: Brigham and Houston. Fundamentals of Financial Management. Seventh Edition. 2012. 2018.