Clarion_I_Lecture

Clarion_I_Lecture - receivable and inventory 325...

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325 Engineering Entrepreneurship Financial Perspective: What Entrepreneurs Should Know Useful concepts and tools of finance Cash Value
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325 Engineering Entrepreneurship Cash Flow Accounting income vs. free cash flow
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325 Engineering Entrepreneurship Cash Flow Accounting income vs. free cash flow Measuring profitability Book value vs. market value Taxes Cash and growth Pattern recognition Don’t run out!
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325 Engineering Entrepreneurship Free Cash Flow = PAT + DEP – CAP X +/- WC Change PAT = Profit after tax DEP = Depreciation (+ amortization) CAP X = Capital expenditures WC = Working capital (Primarily accounts
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Unformatted text preview: receivable and inventory) 325 Engineering Entrepreneurship Discount Rates • Discount rate = + risk-free rate + business risk premium + financial risk premium 325 Engineering Entrepreneurship Value • Requires positive cash flow • And positive net present value • Sensitivity analysis • Creation from financing decisions • Financial flexibility 325 Engineering Entrepreneurship Summary • Finance does not give you “the answer”. • Teaches skepticism • Decisions will have an impact • Increases sensitivity to free cash flow • Helps managers make better decisions...
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This note was uploaded on 10/14/2009 for the course IEMS 395 taught by Professor Bob during the Winter '09 term at Northwestern.

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Clarion_I_Lecture - receivable and inventory 325...

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