The Fisher separation theorem in economics asserts that the objective of a firm will be the maximization of its present value, regardless of the preferences of its owners. The theorem therefore separates management's "productive opportunities" from the entrepreneur's "market opportunities". It was proposed by the economist Irving Fisher who is its eponym. Buyers bargain for good prices while sellers put forth their best front in Chichicastenango Market, Guatemala. ... Firm can have several meanings: Firm - a loose legal term for a company. ... The present value of a future cash flow is the nominal amount of money to change hands at some future date, discounted to account for the time value of money. ... An economist is an individual who studies, develops, and applies theories and concepts from economics, and writes about economic policy. ... Irving Fisher, born (February 27, 1867 Saugerties, New York — April 29, 1947, New York) was an American economist, health campaigner, and eugenicist. ... An eponym is the name of a person, whether real or fictitious, which has (or is thought to have) given rise to the name of a particular place, tribe, discovery or other item. ...

The Fisher Separation Theorem states that:

1. the firm's investment decision is independent of the preferences of the owner;
2. the investment decision is independent of the financing decision.

Fisher showed the above as follows: The firm can make the investment decision — i.e. the trade off in productive opportunities — that maximizes its present value, independent of its owner's investment preferences. The firm can then ensure that the owner achieves his optimal position in terms of "market opportunities" — i.e the position he would have taken in the available productive opportunities — by funding its investment either with borrowed funds, or internally as appropriate. Corporate finance is a specific area of finance dealing with the financial decisions corporations make and the tools as well as analyses used to make these decisions. ...

See also

• Financial economics
• Corporate finance

Financial economics is the branch of economics concerned with the workings of financial markets, such as the stock market, and the financing of companies. ... Corporate finance is a specific area of finance dealing with the financial decisions corporations make and the tools as well as analyses used to make these decisions. ...

External links

• Irving Fisher's Theory of Investment, The History of Economic Thought, The New School
• Great Moments in Financial Economics: Present Value, Prof. Mark Rubinstein, Haas School of Business