Introduction Valuation and Course Goals.pptVIP

Introduction: Valuation and Course Goals Classes 1 and 2: February 21 and 26 (LA) and February 20 and 22 (OCC) Overview of Sessions Finance and financial management Goal of financial managers and corporate governance Accounting and finance Book versus market values Value added and evaluation of performance Valuation: the central concern in finance Finance in the MBA Program Finance is a branch of economics, specifically micro-economics applied to the management of the firm and function of markets Finance is one perspective on the role of the firm, assessing the performance of firms, managers, and assets Finance is relatively rigorous, consistent, and structured in its analysis of firms and financial markets Rigor implies Mathematics: Types? Multi-period expressions with factors raised to powers (present value calculations in Chapter 4) Polynomial functions mean non-linear relations Sometimes more than one way to solve a problem Arithmetic, but in large doses (projections in Chapter 7) Addition and subtraction, ratios (division) and muliplication, Many calculations, not difficult calculations Statistical concepts like correlation (analysis of risk in Chapters 10 and 12) Algebra using equations and unknowns (theory of capital structure in Chapter 15) Common Sense and Rigor Finance is mainly common sense applied to well-structured problems You can personalize the problems we attack You are like a corporation You save and borrow and invest Your decisions are similar to corporate finance issues Credit rating, taxes, cash requirements, risk Your net worth is key Balance Sheet Model of the Firm The Capital Budgeting Decision The Capital Structure Decision Short-Term Asset Management Capital Structure The Financial Manager The Financial Manager’s primary goal is to increase the value of the firm by: Selecting value creating projects Making smart financing decisions The Firm and the Financial Markets Corporate Financial Decisions Investments Long-term strategic comm