Lecture1 - LECTURE 1 OVERVIEW OF FINANCE Reading Chapter...

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1 L ECTURE 1 O VERVIEW OF F INANCE Reading Chapter all of chapter 1, Chapter 3 (Sections 3.1-3.3) Objectives: You should be able to - Understand what the field of Finance encompasses Identify the principal decisions of financial management Identify and justify the goal of financial decision-making Understand the Valuation Principle and the Law of One Price and how financial managers use it Define free cash flow
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1 W HAT IS F INANCE ? Managing the process of turning savings into productive investments Commercial Banks Deposits Interest Loans Interest Proceeds Buy Fund Shares Buy Securities Households Save Income Consume Receive Income Brokers, Dealers & Investment Banks Buy Securities Distributions Dividends & Interest Asset Managers: Mutual Funds, Hedge Funds, Private Equity Funds, Pension Funds, etc Purchases of Goods and Services Wages, Dividends and Interest Non-financial Corporations: Invest in Projects Generate Sales Pay wages Return cash to investors
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1 Important Financial Decisions Individuals: ± How much do I need to save for my child’s education? ± How do I plan for retirement? ± How do I finance a home or a car purchase? ± What funds and securities should I invest in so as to meet my long-term financial goals without “too much” risk? Non-financial corporations ± What projects should we invest it? ± How do we raise money to finance our projects? ± How much money do we return to investors? ± What’s the best way to return that money? ± How do we manage our risks?
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2 The Financial Sector: The Economy’s Middlemen Asset managers (mutual funds, hedge funds, etc.) ± How should I invest my clients’ money? Investment Bankers ± Should one corporation buy another? ± How do I find buyers for a company? ± How should a company raise money? Broker-Dealers ± What kind of financial products do my customers need? ± How do I execute trades for my customers? Commercial Banks
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Lecture1 - LECTURE 1 OVERVIEW OF FINANCE Reading Chapter...

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