As a two-man partnership on a garage, Apple Computer grew rapidly and by 1985, become a large public traded corporation with 60 millions shares of stocks with a value in excess of $1 billion. At that time, the firm’s more visible cofounder, 30-year-old Steven Jobs, owned seven million shares of Apple stock worth about $120 million. Despite his stake in the company and his role in its founding and success, Jobs was forced to abandon operating responsibilities in 1985 when Apple’s financial performance turned unpleasant, and he subsequently resigned altogether. But, in 1997, Apple’s future was still in doubt, and the company hired him back and his ability to turn Apple around was so miraculous. Understanding Job’s Journey from garage-bases entrepreneur to corporate executive to ex-employee and back takes us to the essence of corporate finance. Imagine you were to start your own business.
No matter what type you started, you would have to answer the following three questions in some form or another:
- What long-term investments should you take on? That is, what lines of business will you be in and what sorts of buildings, machinery, and equipment will you need. This is “Capital budgeting”.
- Where will you get the long-term financing to pay for your investment? Will you bring in other owners or will you borrow the money. That is “Capital Structure”.
- How will you manage your everyday financial activities such as collecting from customers and paying suppliers? That is “Working Capital”.
The main goal of this intermediate course is to study ways to answer the above three questions.