Introduction to Strategic Financial Management.pptx - Introduction to Strategic Financial Management NIHAR DALAL BE MBA(FIN MS(FIN CFA What is Strategic

Introduction to Strategic Financial Management.pptx -...

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Introduction to Strategic Financial Management NIHAR DALAL BE MBA(FIN) MS(FIN) CFA
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What is Strategic Financial Management Applied Corporate Finance with an emphasis on firm valuation. In corporate finance, we talk about three major decisions a firm faces With applied corporate finance, we talk about how those decisions can be implemented in the real world In Strategic Financial Management (SFM from here on), we focus on how those decision impact firm value So what are those three decisions? Why are they “strategic”? And why do we measure those decisions against firm value
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The Three Decisions
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The Three Decisions and the Cash Flow Statement The Investing Decisions (CFO and CFI) The Financing Decision (CFO and CFF) The Dividend (Capital Allocation) Decision (CFO, CFF and CFI)
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The CF Statement and Firm Value Value of the firm is the PV of the cash flows More precisely the value of the firm is the PV of free cash flows What is free cash flow and how do the three decisions impact it?
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The Investing Decision and the FCF Free cash flow is defined as some measure of profitability adjusted for the investments the firm makes for future growth Higher investments lower current FCF but possibly increase the FCF going forward The firm’s investments can be into fixed assets, working capital, R&D or acquisitions The investing decision is an extension of the financing decision
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