Finance Essay

179343 Words Nov 29th, 2011 718 Pages
Course: Corporate Finance MBA−10

California College for Health Sciences MBA Program



McGraw−Hill Primis ISBN: 0−390−55204−6 Text: Harvard Business School Entrepreneurship Cases Corporate Finance, Seventh Edition Ross−Westerfield−Jaffe Harvard Business School Finance Cases

This book was printed on recycled paper. Finance
Copyright ©2005 by The McGraw−Hill Companies, Inc. All rights reserved. Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without prior written
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1. Introduction to Corporate Finance

© The McGraw−Hill Companies, 2004


Chapter 1
Introduction to Corporate Finance
The Video Product Company designs and manufactures very popular software for video game consoles. The company was started in 2002, and soon thereafter its game “Gadfly” appeared on the cover of Billboard magazine. Company sales in 2003 were over $20 million. Video Product’s initial financing of $2 million came from Seed Ltd., a venture-capital firm, in exchange for a 15-percent equity stake in the company. Now the financial management of Video Product realizes that its initial financing was too small. In the long run Video Product would like to expand its design activity to the education and business areas. It would also like to significantly enhance its website for future Internet sales. However, at present the company has a short-run cash flow problem and cannot even buy $200,000 of materials to fill its holiday orders. Video Product’s experience illustrates the basic concerns of corporate finance: 1. What long-term investment strategy should a company take on? 2. How can cash be raised for the required investments? 3. How much short-term cash flow does a company need to pay its bills? These are not the only questions of corporate finance. They are, however, among the most important questions, and taken in order,

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