Finance lecture 1:
What is fincance?
1. How business generates money
2. How money generates money
https://www.youtube.com/watch?v=uCVCfSGMi-k
https://www.youtube.com/watch?v=pRcu8po7tC0
What is corporate finance:
Investment:
- What long term investments will you make?
Financing:
- Where will you get long-term financing for your long-term projects
Working Capital Management-Liquidity:
- How will you manage your everyday activities?
Decisions must be taken in three key areas:
- Investments
- Finance
- Working capital
Role of management and goal congruence:
Agency theory = often used to describe the relationships between the various interested
parties in a firm and can help to explain the various duties and conflicts that occur:
- Agency relationships occur when one party, the principal, employs another party,
the agent, to perform a task on their behalf. In particular, directors (agents) act
on behalf of shareholders (principals)
, - Finding ways to reduce the problems of the agency relationship and ensure that
managers take decisions which are consistent with the objectives of shareholders
is a key issue.
Financial management decision 1:
Capital budgeting:
- The process of planning and managing a firm’s long-term investments
- Identify investment opportunities that are worth more to the firm than they cost
to acquire
- Financial managers must be concerned not only with how much cash they expect
to receive, but also with when and how likely they are going to receive it
Financial management decision 2
Capital structure:
- The mixture of long-term debt (borrowing) and equity (owner’s investment)
maintained by a firm
- 1. How much should the firm borrow?
2. What are the least expensive sources of funds for the firm
- The financial manager also has to decide exactly how and where to raise money
, Financial management decision 3:
Working capital management:
- The management of a firm’s short-term assets and liabilities
- How much cash and inventory should we keep on hand?
- Should we sell on credit? If so what terms will we offer, and to whom will we
extend them?
- How will we obtain any needed short-term financing
The goal of financial management = maximise value of owner’s equity
Corporate and financial markets:
Financial market = market where securities are issued and traded
Primary vs secondary markets:
Primary markets Secondary markets
Securities are created and sold to investors Securities are traded among investors
Money raised goes to issuing firm Money change hands between investors
IPO and SEO Share prices
What is fincance?
1. How business generates money
2. How money generates money
https://www.youtube.com/watch?v=uCVCfSGMi-k
https://www.youtube.com/watch?v=pRcu8po7tC0
What is corporate finance:
Investment:
- What long term investments will you make?
Financing:
- Where will you get long-term financing for your long-term projects
Working Capital Management-Liquidity:
- How will you manage your everyday activities?
Decisions must be taken in three key areas:
- Investments
- Finance
- Working capital
Role of management and goal congruence:
Agency theory = often used to describe the relationships between the various interested
parties in a firm and can help to explain the various duties and conflicts that occur:
- Agency relationships occur when one party, the principal, employs another party,
the agent, to perform a task on their behalf. In particular, directors (agents) act
on behalf of shareholders (principals)
, - Finding ways to reduce the problems of the agency relationship and ensure that
managers take decisions which are consistent with the objectives of shareholders
is a key issue.
Financial management decision 1:
Capital budgeting:
- The process of planning and managing a firm’s long-term investments
- Identify investment opportunities that are worth more to the firm than they cost
to acquire
- Financial managers must be concerned not only with how much cash they expect
to receive, but also with when and how likely they are going to receive it
Financial management decision 2
Capital structure:
- The mixture of long-term debt (borrowing) and equity (owner’s investment)
maintained by a firm
- 1. How much should the firm borrow?
2. What are the least expensive sources of funds for the firm
- The financial manager also has to decide exactly how and where to raise money
, Financial management decision 3:
Working capital management:
- The management of a firm’s short-term assets and liabilities
- How much cash and inventory should we keep on hand?
- Should we sell on credit? If so what terms will we offer, and to whom will we
extend them?
- How will we obtain any needed short-term financing
The goal of financial management = maximise value of owner’s equity
Corporate and financial markets:
Financial market = market where securities are issued and traded
Primary vs secondary markets:
Primary markets Secondary markets
Securities are created and sold to investors Securities are traded among investors
Money raised goes to issuing firm Money change hands between investors
IPO and SEO Share prices
