Why finance matters
• Financial decisions are crucial because investments made today have long-term fundamental effects on the business.
• With the globalization of markets, power belongs not to politicians (Clinton and so on), but to people who have financial (and media) power: Bill Gates, Georges Soros, Berlusconi...
ie: Mexican crisis: National Governments had no power against pension funds holders

Corporate finance and corporations
•We speak about corporate finance so a corporation is not:
- a sole proprietorship: the company belongs to one person that has unlimited liability (and no employer social security)
- partnership: id. but each partner is under unlimited liability
• A corporation is an entity legally distinct from its owners. Its main characteristics are:
- It can borrow money, sue, pay taxes, etc.
- limited liability: what you lose in a case of bankruptcy is at most your stocks.
- In general managers are not owners.
- More convenient if your firm grows

The financial manager
Three main responsibilities for the financial manager:
- what investment should the firm make ? = spending money: investment/ Capital budgeting decision (we need criteria to know if a decision is worth taking)
-sources of funds = Financial structure
- managing everyday financial activities = working capital management (very important because many firms go bankrupt while they make profit just because they have no available cash)