FL01 25/9/15 Prof. Michael Shillig
INTRODUCTION TO FINANCE, CREDIT & SECURITY
INTRODUCTION
2hr exam in Jan – choose 2 out of 6 (PQ and/or Essays)
2 formative essays throughout the semester
AIMS AND OBJECTIVES
Finance and finance theory
Law of credit and security
FINANCE
How companies carry out their business through equity and debt
How to value things – in particular financial assets
o Share, bonds, companies, investment projects
o Trying to buy stuff that is offered cheaper but worth more than the
price
o Whether to allocate resources to a particular financial asset – if
more valuable than price (cost of acquisition)
Hybrid of:
o Economics (making choices under constraint)
In accordance with preference order
o Statistics (dealing with risk and randomness)
Investments are risky – quantify risk in order to determine
value of financial assets
o Accounting (the language of business)
CREDIT AND SECURITY
Equity finance v debt finance
o Equity finance – found in company law, corporate law, etc.
Focus will be on the legal structures that support debt finance
o Debt finance – contract or securities transaction
o Securities regulation, etc.
DON’T CONFUSE – securities with security interests
o (investment) securities: negotiable instruments freely tradable in
financial markets
Held through a chain of intermediaries
E.g. shares, bonds, notes, derivatives, hybrid instruments
o Security interests: proprietary interests in assets in order to ensure
repayment of debt
E.g. mortgage, floating charge, fixed charge
COURSE OVERVIEW
Basics of finance and finance theory
o Capital structure & financial statements (week 1 & 2)
o Compounding/discounting – math (week 3)
o Capital budgeting/NPV – how to allocate resources (week 4)
Whether to acquire asset or not – if NPV >0
Impact on law of credit and security
o Syndicated lending
o Debt securities
INTRODUCTION TO FINANCE, CREDIT & SECURITY
INTRODUCTION
2hr exam in Jan – choose 2 out of 6 (PQ and/or Essays)
2 formative essays throughout the semester
AIMS AND OBJECTIVES
Finance and finance theory
Law of credit and security
FINANCE
How companies carry out their business through equity and debt
How to value things – in particular financial assets
o Share, bonds, companies, investment projects
o Trying to buy stuff that is offered cheaper but worth more than the
price
o Whether to allocate resources to a particular financial asset – if
more valuable than price (cost of acquisition)
Hybrid of:
o Economics (making choices under constraint)
In accordance with preference order
o Statistics (dealing with risk and randomness)
Investments are risky – quantify risk in order to determine
value of financial assets
o Accounting (the language of business)
CREDIT AND SECURITY
Equity finance v debt finance
o Equity finance – found in company law, corporate law, etc.
Focus will be on the legal structures that support debt finance
o Debt finance – contract or securities transaction
o Securities regulation, etc.
DON’T CONFUSE – securities with security interests
o (investment) securities: negotiable instruments freely tradable in
financial markets
Held through a chain of intermediaries
E.g. shares, bonds, notes, derivatives, hybrid instruments
o Security interests: proprietary interests in assets in order to ensure
repayment of debt
E.g. mortgage, floating charge, fixed charge
COURSE OVERVIEW
Basics of finance and finance theory
o Capital structure & financial statements (week 1 & 2)
o Compounding/discounting – math (week 3)
o Capital budgeting/NPV – how to allocate resources (week 4)
Whether to acquire asset or not – if NPV >0
Impact on law of credit and security
o Syndicated lending
o Debt securities
