We’ve discussed that an important job of the financial manager is to create value for a for how a
financial manager can create value is one of 2 ways they can either try and buy assets that generate
more value than they cost to purchase or they can sell bonds stocks and other financial instruments
that raise more money than they cost to produce overall the financial manager must create more cash
than it uses specifically this means that all cash flows paid to debt holders and to stoppers should be
greater than the cash flows that bond holders and stockholders investment for if the Castros at the
investors receive are not as high as what the best this is just that the investors are earning a negative
return as I mentioned our focus in this course will be on corporations we’ve seen that the primary
benches of the corporate flock of organization are that ownership can be transferred quickly and easily
that with other forms and because of these reasons money can be raised more readily both of these of
them are significantly enhanced by the existence of financial markets and financial markets therefore
playing extremely important role in corporate finance a financial market just like any market is a way
of bringing buyers and sellers together in financial markets debt and equity securities are what’s being
brought and sold the picture on the right shows the cash flows between a firm and a financial market
specifically we’re dealing with financial markets that are selling and buying debt and buying and
selling equity to start cash comes into the fur from a firm selling debt equity this is what’s happening
in step at the firms issuing securities the securities are either in the form of debt or equity they sell the
securities to investors and investors pay that for cash. The firm then uses the cash it raised by selling
debt equity to invest in assets it can either invest in short and short term current assets or a long term
fixed assets these purchase assets should generate products or services that can generate cash for the
for essentially the money that the firm invested assets should be invested in assets that can produce
goods and services that the firms that can sell back to customers we’ve been get to see where the
firm’s operations or whatever its products are translate into cash revenue for the for the cash that the
firms from selling its goods and services are spread into 3 different sections one some of the cash that
