ADMN 4116: Portfolio Management Lecture 1: Introduction

1. ADMN 4116: Portfolio Management Lecture 1: Introduction Anton Miglo Spring 2015

2. Organizational comments • Blackboard: course outline, grades, announcements, PPT and PDF slides • Class notes: key for your success • Assignments: no late assignments • Investment game: teams • Tests: TBA • E-mail: no e-mail communication; only emergency cases (medical or smth.); I don’t answer the message if it was answered in class.

3. Organizational comments • Grades: additional points • It has two parts: first 5% are given to everybody in the beginning of the course. • This can only be reduced in the following cases: • Irrespective behaviour • Disruptive behaviour • Missing classes • Second 5% will be given at my discretion for class participation. Since any direct control of attendance is difficult and inefficient the following criteria are typically used: • Questions in class • Questions outside of class (office hours, not e-mail).

4. Organizational comments • Stock Track Investment Management exercise: interaction, strategy, creativity • Group projects: cases

6. Please! 1.Don’t …. 2.Turn it off!

9. Topics • Introduction • Types of securities • Risk and Return • CAPM and Portfolio Management • Fixed-Income Securities • Equity Analysis • Options, Futures and Forwards • Advanced Topics

11. Topics Covered Lecture 1: • Money and finance • Types of business organization • Financial decisions and corporate organization chart • Financial information versus accounting reports • Introduction to Excel

12. Money and Finance

13. Projects

14. Securities

15. Forms of Business Organization

16. Organization Chart Board of Directors CEO CFO GM Production GM Marketing Treasurer: raising capital banking relationship Controller: Prepares financial statements and budgets, Internal accounting, taxes

17. Cash 42 Receivable 86 Inventory 14 Short-term Investments 15 Fixed Assets 902 Intangible Assets 85 Total Assets 1,144 The Balance Sheet (Accounting View) ASSETS LIAB&EQUITY Book Values!!!! Bank loan 40 Ac. Payable 120 Bonds 60 Long Term Bank Debt 464 Capital 110 Additional capital 40 Retained earnings 310 Liab&Shareholders’ Equity 1,144 =

18. Assets in place 1,144 Growth Assets 140 Total Assets 1,284 The Financial View of the Firm ASSETS LIAB&EQUITY Market Values!!!! Debt 684 Equity 600 Liab&Shareholders’ Equity 1,284 =

19. Income Statement

20. Excel! • EVERYONE uses it! • The biggest technical skill needed in business • Use Excel to do finance and you’ll have a double advantage: Both finance and Excel

21. Introduction to Excel • Basic basics about Excel! • Can probably be skipped! Most students know this materials

22. Getting started • You’ve managed to open Excel Excel button Office button on desktop

23. Excel 2003, Excel 2007, Excel 2010 • All versions basically the same • Differ in minor stuff (graphics, toolbars) • All spreadsheets for Principles of Finance with Excel work in all versions of Excel (though see next slide)

24. The small print • PFE files are saved in the Excel 2007/2010 format • To open in Excel 2003, download the compatibility pack from Microsoft:

25. Some rules for financial modeling • These rules will help you build better spreadsheets • Readibility, Logic, Simplicity—this is what you should strive for

26. Try to put important variables in one place

27. Don’t hard-wire numbers • Use formulas instead of numbers

28. Avoid using blank columns to accommodate cell “spillovers”

29. Do not forget to name your spreadsheets UGLY!! You can name sheets by clicking on the sheet tab.

30. Adding “Getformula” to your spreadsheet • Some of my spreadsheets embed a small program called Getformula that allows you to see what you’ve written in a cell • When you open such a file, Excel will ask you if you want to open Getformula:

31. You may have to tinker with your spreadsheet Security settings!

32. You’ve got a blank spreadsheet • Which format?? • Excel Workbook: OK for most uses • Excel Macro-Enable Workbook: If you want to embed Getformula macro into spreadsheet • Excel 97-2003 Workbook: Lowest common denominator • Save it! (all the time!) • Where should you save it? • My documents • Special folder? • Anton/Junk is a folder I’ve created

33. Formatting the numbers Mark numbers to be formatted Press right mouse button and choose Format Cells

34. Relative versus absolute copying Relative copying Absolute copying

35. First spreadsheet How does an investment of $1000 grow over time with 15% annual interest? Note formula in cell and in Formula Bar

36. Copying the formula by dragging The result

37. Excel hint • Instead of dragging cell B4, there’s an even simpler way to copy. • Put your cursor on the handle and double-click with the left mouse button • The formula will be copied through the last row of the adjacent filled column. • In this case: from cell B5 through B13.

38. Formatting: Look at the toolbar • You can change the fonts • You can change the cell alignment • You can merge cells, wrap text • You can do number formats • PLAY AROUND WITH THIS! IT’S EASY!

39. Shortcut There’s a shortcut to this format (2 decimals, comma): Ctrl+Shift+!

40. Use F4 to change from Relative to Absolute references At this point, you’re still in the cell (haven’t hit Enter). By hitting F4, you can change the B2 to various kinds of absolute references: $B$2: Absolute when copied $B2: Column absolute, row relative B$2: Row absolute, column relative B2: Back to all relative

41. Digression: Shortcuts in Excel • Many! • F1: Help • F2: Edit cell • F4: Repeat lastaction • F2, then F4: change from relative to absolute copying

42. [End]+[Arrow] shortcut • Problem: You have a lot of data and you want to mark it all • Put cursor on first cell • Hold down Shift key • Push End key and Down-arrow • Problem: You have a lot of data and you want to get to the other end • Put cursor on first cell • Push End key and Down-arrow

44. Last slide: 

45. Last slide: 