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Lecture Notes Week 1

Lecture Notes Week 1 - Lecture Notes Finance 220 Week 1 1...

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Lecture Notes – Finance 220 – Week 1 1. Welcome to AC 220, a first course in finance from Herzing University Online. This presentation will cover the first two chapters of your text. These chapters focus on the principles of finance, and the financial environment. As you listen to this presentation, you might want to follow along in the text. Although this presentation stands alone, it was designed to augment the text material. Your text, of course, goes into much greater detail. This presentation will be divided into 3 sections. 2. The key concepts that we will cover this week include a review of the history of Finance. In addition, we will explore key decisions Financial Managers must face in managing a firm. Our content will include various business organizations, the goal of financial management, conflicts that may arise between owners and managers of a firm. Lastly, we will review the financial statements. 3. Corporate finance addresses several important questions: 1.) What long-term investments should the company choose also known as Capital budgeting, 2.) Where will we get the long-term financing to pay for the investments also known as Capital structure and 3.) How will we manage the daily financial activities of the firm which is known as working capital? 4. Financial managers need to correlate the relationships between economics and accounting. Economics provides a structure for decision making in areas of risk analysis, pricing theory, and return analysis. Economics also provides the big picture of the economic environment where corporations make decisions. A financial manager must understand the institutional structure of the Federal Reserve System along with the banking system and the relationships between various sectors of the economy. Accounting is sometimes called the language of finance since it provides financial information through financial statements. The financial manager must know how to interpret and use these statements in allocating the firms resources to generate the best return in the long run. All financial managers must understand what it means to assess the financial performance of a firm. Finance combines the economic basis with an accounting understanding in order to manage funds while focusing on the time, cash at hand and the risk involved. Finance deals with the pursuit of opportunity and the possibilities open to entrepreneurship. 5. By the turn of the century, Finance was no longer a topic in Economic Theory. It developed into a separate field of study. The Great Depression of the early 1930s
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was the most severe shock the American economy has suffered in the past century. After a period of unprecedented prosperity in the late 20s, the stock market crash of 1929-1930 signaled the beginning of a disastrous depression. U.S.
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