1994 AswathDamodaran(200 1), who was rated as one of the top professors in American 12 business schools by Businessweek, has always believed in his book "Corporate Finance: Theory and Practice" that the research object of corporate finance is all the financial decisions made by the company. These decisions can be divided into three parts: decisions related to resource allocation (investment decisions) and decisions related to project financing (capital structure decisions); Decisions related to establishing reinvestment or cash withdrawal limits (dividend decisions). Brigham and Ehrhardt(2005) put forward in their book Financial Management: Theory and Practice that most financial management knowledge revolves around three questions: (1) What factors produce the stock value of a specific company; (2) How managers choose the decision to increase the company's value; (3) How can managers ensure that the company will not be short of funds when implementing these plans? Ross(2002) and others hold that financial managers must pay attention to three basic issues in the book "Fundamentals of Corporate Finance": the first issue focuses on the long-term investment (capital budget) of enterprises; The second problem focuses on the acquisition and management mode (capital structure) of long-term financing for enterprises to support their long-term investment needs; The third problem focuses on the management of daily financial activities (working capital management) such as customer payment and payment to suppliers. If we further investigate the content arrangement of these three textbooks and other financial management textbooks, we will find that western scholars have similar understanding of the financial management framework, that is, an objective function, four modules and a financial management toolbox. Among them, one goal is to maximize the value of the company; These four modules include investment decision, financing decision (or capital structure), dividend decision and working capital management; There are four tools in the financial management toolbox, namely accounting statements and ratios, present value, risk-return model and option pricing model.
Any discipline is based on a series of assumptions. Professor Damodaran once summarized the basic assumptions of building financial management science into four groups, namely, the assumption that the objective function of managers and shareholders is consistent, the assumption that the interests of creditors are completely protected, the assumption that the market is efficient and the assumption that the social cost is zero. Although Professor Damodaran thinks that these basic assumptions are far from the "real world" and have been severely criticized from many aspects, although he tries to find a new objective function and theoretical system to solve the vivid financial conflicts in the "real world", such as the conflict between managers and shareholders, the conflict between shareholders and creditors, and the conflict between companies and society. So far, no complete solution has been found, and these assumptions are still the basis for building a modern western financial management theory and method system.