Corporation Finance FI 3300 - Ryan M. Williams at The University of

Report
Instructor - Ryan Williams
My information
 Ryan Williams
 Email: [email protected]
 Website: myrobinson.gsu.edu, Ulearn,
http://www.ryanwilliams7.com
 Office location: RCB #1217, 12th floor.
 Office phone: 404-413-7316
 OFFICE HOURS: Wednesdays at 2:30-4:00 pm or by
appointment.
Today’s Agenda
 Quick summary of syllabus
 Discussion of course
 My expectations
 Chapter 1 – Introduction
 Math Skills
 Chapter 2 – Income Statement and Balance Sheet
Syllabus – Important Highlights
 Attendance policy – Department-wide!
On this – you are allowed to miss two weeks of class.
That means only TWO classes.
 I reserve the right to pass the attendance sheet at any
point in time.
 Exam 1
 Exam 2
 Final Exam
Grading Policy
 Two midterms: 25% each
 One Final Exam: 40%
 Quizzes: 10%
 We will have 6 quizzes and I will drop the lowest 2. (1
out of first 3, 1 out of last 3). If you miss a class you will
receive a 0% for the quiz.
Texts
 Main text: “Lectures in Corporate
Finance”, 5th ed., by Jayant Kale and
Richard Fendler.
 Optional: 12-week subscription to
The Economist, cheap student rates.
Go to
http://www.economistacademic.com
and use Faculty ID code 6105.
Calculator
 Texas Instruments BA II Plus
 HP also makes a version
 Can use NO calculator with a memory
 We have used calculators available for $20. First come,
first serve. Contact Prof. Genna Brown
[email protected]
Course Outline
 Split into 3 sections:
 1) Blending Accounting and Finance
 Financial Statements, F.S. Analysis, Fin. Mngt
 2) Valuation from an Investor’s point of view
 Time value of money, valuing stocks, valuing bonds
 3) Valuation from a CFO’s point of view
 Capital Budgeting
Course outline - 2
 Course gets progressively harder over time.
 Keep up with the work, if you start to fall behind come
to my office hours or form study groups.
Classroom rules
 Cellphones OFF – If your phone rings, I get to answer
it. (Also true for me).
 No texting. If I see you texting you will be asked to
solve a problem on the board.
 I prefer no laptops. However, if you take notes on the
laptop, please sit near the back of the classroom so you
do not distract students behind you.
Why are you here?
Learning Objectives
1.
2.
3.
4.
5.
Identify the three main subject areas in finance
Know the different forms of business organization
and discuss the agency problem
Define the goal of corporate financial management
Compare/contrast finance and accounting
Understand how cash affects value
Why is finance important?
 A horrible product (usually) dooms a business.
 A great product is not enough - horrible financial
management coupled with a great product (usually)
also dooms a business.
3 subfields of finance
 Financial markets and institutions (or Banking) =
Middleman
 Investments = Surplus (they invest money in stock, bonds,
and savings accounts)
 Corporate Financial Management (or Corporate Finance)
= Deficit (they take money from investors and buy stuff)
*Identifying, managing, and valuing risky
cash flows is the goal of finance*
Basic forms of Business
Organization
 Sole proprietorship
 Partnership
 Corporation
 Advantages/Disadvantages?
Ownership structures
Type
Ownership
Ability to Raise
Capital
Liability
Sole
•100% owned by a
Proprietorship single individual
•Owner usually
manages company
Difficult
Unlimited
personal liability
Partnership
Two or more
individuals
Less difficult
than Sole
Proprietorship
Similar to Sole
Proprietorship
Corporation
Typical separation of
owners and
managers
The least difficult Limited to
of all forms
owner’s initial
investment
Also taxation and liquidity differences
Agency Problem
 Getting the agent (the person running the business) to
act in the interest of the principal (the shareholders
who own the business).
Financial manager’s goal
 Maximize value of the firm.
 Same as maximizing stock price.
 NOT the same as “maximizing profits”. Why not?
 She accomplishes this goal by two basic decisions:
How to get money (raise capital), and what to do with
it (real investment).
Accounting and Finance
 Accounting USUALLY deals in Book Value (i.e. cost)
 Finance USUALLY deals with Market Value (what someone
would pay you for it today).
 Accounting is historical data (annual reports, 10-K filings,
etc).
 Finance attempts to project future data – BUT YOU NEED
TO UNDERSTAND ACCOUNTING TO DO THIS
Cash and Value
 Value = all future expected cash flows discounted by
their riskiness (we will slightly refine this definition
later).
 CASH is the only thing that matters here!
 This may seem counterintuitive right now, but should
be more clear when we look at Stock Valuation in
Chapter 9.
Class Summary – Why should you
care?
 After the introductory accounting chapters, this entire
class is associated with VALUE.
 Specifically, how to value a bond, a stock, or a new
project for a company.
Next class
 Quiz 1
Math Test

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