Financial Management MGMT 120 / Lynn "Let no debt remain outstanding, except the continuing debt to love one another." Romans 13.8 Finance: A Money Refinery Careers in Finance Commercial Banking Corporate Finance Financial Planning Insurance Investment Banking Money Management Real Estate Development Finance ACU Finance Professors Terry Pope PhD, CFA Conoco Jack Griggs PhD, CPA Banking Jonathan Stewart PhD, CFA Research STAR: Student Managed Investment Fund Today's Questions What is finance? How do companies find capital? What could I do with a financial management major? From the perspective of the... Economy Firm Investor What is Finance? At the economy level, finance is the study of financial institutions financial markets and how they operate within national and international financial systems What is Finance? At the firm level, finance is the study of corporate financial planning asset management fund raising for businesses and financial institutions What is Finance? At the investor level, finance is the study of investments personal financial planning Finance vs. Accounting Finance Cash flow focus Accounting Accrual focus Analyzing and interpreting financial data for decisionmaking purposes Organizing and presenting financial data How Companies Attract Capital Sales revenues the largest part of the firm's financing Debt capital (bonds) borrowed money obtained through loans Equity capital (stock) money received from the owners or from the sale of shares of ownership in the business Proceeds from the sale of assets assets are disposed of if absolutely necessary, when no longer needed, and when they don't fit in the company's core business Entrepreneurial Financing Small Business Financing Investment Banks Personal savings Merrill Lynch Family Morgan Stanley Dean Witter Commercial banks Solomon Smith Barney Private investors Goldman Sachs Industrial foundations Boutiques Financing a Business Angel Investor Venture Capital / Investment Bank Stockholders Private Company seed early expansion later IPO Public Company acquisition turnaround Initial Public Offering (IPO) Why go public? Prestige Personal wealth Cash infusion Liquidity Stock as currency Downsides IPO expense Continuing expense Loss of privacy Cost of an IPO: RealNetworks SEC Registration NASD Filing Nasdaq National Market Listing Legal Accountants Blue Sky Filing and Council Printing and Engraving Transfer Agent and Registrar Miscellaneous Total $ 13,591 4,985 50,000 325,000 225,000 5,000 150,000 10,000 166,424 $950,000 Source: Tom Taulli (1999). Investing in IPOs. Princeton, NJ: Bloomberg Press, p. 19. Development Finance Microfinance and Microsaving Clients get a `savings card' with the 220 cells shown on it. JYOTHI SAVINGS a deposit collector Jyothi's fee Jyothi's fee works out at 9% of the total savings, or as a negative interest rate of about 30% a year. she collects a set amount of savings from her clients every day for 220 days: then she gives back the value of 200 days' savings Slum women are very keen to use a reliable deposit collector like Jyothi. Where else can they save up the usefully large sums they so often need? Stuart Rutherford, The Poor and their Money, Oxford University Press. RICKSHAW LOTTERY ROSCA Poor people are often inventive about how they turn their savings into lump sums. A lottery ROSCA decides who gets the prize by chance rather than by consensus. contributions by each member each day two-week draw and rickshaw purchase In Dhaka, Bangladesh, poor men up from the villages often drive rickshaws. They run these ROSCAs without help from any outsider. They get together in groups. Each man contributes a small fixed amount at the end of each day. As soon as there is enough money to buy one rickshaw they do so. The rickshaw is then awarded by lottery to one of the group. As soon as you have received your rickshaw you start paying double. This is `fair' as you don't have to hire a rickshaw any more. This speeds up the process of the ROSCA, which helps to guard against members running away after getting their rickshaw. Stuart Rutherford, The Poor and their Money, Oxford University Press. Careers in Finance Would you enjoy finance? Responsible and honest Foundation in accounting and at home with math Computer literate in analyzing data Skilled in written and oral communication Faith What does scripture say about money? How can financial tools be used to help people, churches, the poor? What dangers exist around money?