part I lecture notes374 RWJFALL2010 - Course structure Look...

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Course structure Look over notes before class In lectures we’ll go over theory, work out problems, show applications, and illustrations If you miss lectures, get what you missed (e.g., answers to problems, handouts) from classmate Textbook will provide basic structure of course--we’ll cover most of chapters, in varying degree of detail (lectures emphasize what I think is important). Finance is quantitative (i.e., lots of numbers). Intro course … basic mathematics and statistics … but lots of it! How to keep up with financial current events? Go over syllabus 1
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Part I of lecture notes Introduction to course Review of Financial Statements and their Uses Time Value of Money Concepts and Applications Bond and Stock Valuation Risk and Return Measures and Concepts Portfolio Theory and the CAPM Introduction (Chapter 1) What is finance? “External” vs. “Internal” Internal finance: How decisions are made by financial managers of companies Financial manager titles: Chief Financial Officer, Treasurer, Financial Analyst …. 2
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Decisions regarding …. Investment in real assets (capital budgeting) How to finance the assets with equity or debt (capital structure) How to manage working capital (current assets and liabilities) Lots of other decisions … such as how much of net income to pay as dividends, how to deal with foreign currency transactions, etc. These topics are the primary concern of the course. Our perspective is that of a financial manager of a company. External finance: How those outside of the company evaluate it for the purpose of investing in its securities (stock and bonds). This is what individual investors, security analysts, and portfolio managers do. This is not the primary concern of this course. Many of the tools of analysis used by financial managers and those concerned with investment management are the same. Financial statements, financial ratios, time value of money and valuation formulas, risk and return concepts, …. 3
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For a good source of information on the wide variety of careers in finance check out the website - finance.com Basic financial market concepts Primary market: where a stock or bond is first sold Mention IPO Secondary market: where existing stocks or bonds are bought and sold (change ownership). Note that corporation receives no $ when these exchanges occur. New York Stock Exchange (NYSE) and National Association of Securities Dealers Automated Quotation System (NASDAQ) are 2 major secondary markets. Secondary markets are important because the price (value) of securities is determined here. Financial managers should have the objective to maximize the wealth (i.e., the stock value) of the owners of the corporation (the shareholders).
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