ADMN 3116: Financial Management 1 Lecture 1: Introduction

1. ADMN 3116: Financial Management 1 Lecture 1: Introduction Anton Miglo Fall 2014

2. Organizational comments • Blackboard: course outline, grades, announcements, PPT slides • Class notes • Assignments (cases and projects): no late assignments • Investment game: teams • Excel

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. Investment game

5. Topics covered • Introduction • Time Value of Money • Basic Valuation of Bonds and Stocks • Investment Criteria • Risk and Return • Introduction to Portfolio Management • Introduction to Cost of Capital and Capital Structure • Introduction to Options

6. 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 • Additional readings: B ch. 1

7. Money and Finance

8. Timelines Projects Securities

9. Forms of Business Organization

10. 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

11. 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 =

12. 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 =

13. Income Statement

14. Books Fundamentals of Corporate Finance, Can. Ed. 8thed. Brealey, Myers,… 2. Principles of Finance with Excel, Benninga 3. Corporate finance: basic theory and advanced topics, A. Miglo, Xlibris, 2012

15. Excel! • Absolute and relative copying

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

17. Try to put important variables in one place

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

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

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

21. Adding “Getformula” to your spreadsheet • All PFE spreadsheets embed a small program called Getformula that allows you to see what you’ve written in a cell • When you open a PFE spreadsheet, Excel will ask you if you want to open Getformula:

22. You may have to tinker with your spreadsheet Security settings! See PFE, Chapter 1 for details.

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

24. Relative versus absolute copying Relative copying Absolute copying

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

26. Copying the formula by dragging The result

27. 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!

28. Last slide: 