Chapter 2 The balance sheet
Balance sheet - snapshot of the firm, assets and liabilities and equity at a given point in time
Financial leverage - use of debt, the more debt, the great financial leverage. It can greatly
magnify gains and losses
Financial topics grouped four main areas
Corporate finance, investments, financial institutions, international finance
Investments - what determines the price of an asset or stock? What are the risks and rewards
with investing in financial assets? Best m
Sales $ 2,385,000
Cost of goods sold 1,440,000
Other expenses 436,000
Taxable income $ 198,500
Taxes (30%) 0
Net income $ 198,500
The taxes are zero since we are ignoring any carryback or carryforward pro
Chapter 3 financial statements
Common sized statements and balance sheets = everything expressed as percentage
5 groups of Financial ratios - short term solvency aka liquidity ratios, long term solvency aka
financial leverage ratio, asset management aka t
Bonds, Chapter 7
What is a bond?
What do the (promised) cash flows look like?
How do you value a bond?
What is a YTM and how do you determine it?
Why is it that two different bonds promising identical cash flows may have two different value
Investment Decision Rules, Chapter11
Investment decision rules are methods to decide which projects to take and which to reject.
Theyre also called capital budgeting rules. (The name capital budgeting is a relic.)
What are the NPV and IRR rules
How can I predict my firms future financing needs?
Lecture notes prepared by Pegaret Pichler
Revised March 20, 2016
FinPlanning, Chapter 17
Steps in Financial Planning
1. Develop a sales predicti
Interest Rates, Chapter 6
Here are some of the questions you should be able to answer after this lecture:
What is the difference between real and nominal rates?
What is the correct way to calculate NPV when there is inflation?
What is traded in the Tre
Cash Flows, NPV and Real Options,
Chapters 12 and 13
Bring to class: Your laptop with the Excel spreadsheet from Blackboard.
What are the relevant cash flows for NPV analysis?
What are the relevant cash flows if Im considering selling or repla
What are the advantages of paying dividends vs repurchasing shares?
How does each of these affect share value?
What is a stock dividend? What is a stock split?
Q1: What can a firm do with its free cash flow?
Working Capital Management
What is working capital management?
How can I improve my working capital management?
What is the Cash Conversion Cycle?
Should I pay my suppliers early or late? Should I offer discounts to my customers w
Multinational Financial Management
Why do firms invest abroad?
What are the risks?
What are spot and forward exchange rates?
What is interest rate parity and purchasing power parity?
April 9, 2016
Stocks & Stock Valuation Chapter 9
What is equity?
What are the different types of information that can help me value a firms stock?
How can I value a stock based on expected dividend payments?
How can I value a firms stock using free cash f
Capital Structure (Debt Policy)
Is a pizza more valuable if it is cut into 16 slices instead of 8?
Is skim milk and cream (separated) more valuable than whole milk (unseparated)?
What is meant by capital structure?
What is the diff