This document introduces corporate finance and the goals of corporate firms. It discusses three key questions corporate finance addresses: what investments a firm should engage in, how to raise money for investments, and how much cash is needed for short-term obligations. It also summarizes different business forms, the balance sheet model, and how debt and equity are contingent claims on firm value. Finally, it discusses traditional and alternative views on corporate goals, including profit maximization, earnings per share, and shareholder wealth maximization.
time value of money
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concept of time value of money
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significance of time value of money
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present value vs future value
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solve for the present value
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simple vs compound interest rate
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nominal vs effective annual interest rates
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future value of a lump sum
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solve for the future value
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present value of a lump sum
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types of annuity
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future value of an annuity
time value of money
,
concept of time value of money
,
significance of time value of money
,
present value vs future value
,
solve for the present value
,
simple vs compound interest rate
,
nominal vs effective annual interest rates
,
future value of a lump sum
,
solve for the future value
,
present value of a lump sum
,
types of annuity
,
future value of an annuity
The presentation slide is on stock valuation. We have tried to present the various techniques to stock valuation under which different methods are discussed with illustrations. Key concepts:
Zero Growth Model
Balance sheet Technique
Constant Growth Model
Two-stage growth Model
Feel Free to comment.
What is the 'Time Value of Money - TVM'
The time value of money (TVM) is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also referred to as present discounted value.
BREAKING DOWN 'Time Value of Money - TVM'
Money deposited in a savings account earns a certain interest rate. Rational investors prefer to receive money today rather than the same amount of money in the future because of money's potential to grow in value over a given period of time. Money earning an interest rate is said to be compounding in value.
BREAKING DOWN 'Compound Interest'
Compound Interest Formula
Compound interest is calculated by multiplying the principal amount by one plus the annual interest rate raised to the number of compound periods minus one.The total initial amount of the loan is then subtracted from the resulting value.
The presentation slide is on stock valuation. We have tried to present the various techniques to stock valuation under which different methods are discussed with illustrations. Key concepts:
Zero Growth Model
Balance sheet Technique
Constant Growth Model
Two-stage growth Model
Feel Free to comment.
What is the 'Time Value of Money - TVM'
The time value of money (TVM) is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also referred to as present discounted value.
BREAKING DOWN 'Time Value of Money - TVM'
Money deposited in a savings account earns a certain interest rate. Rational investors prefer to receive money today rather than the same amount of money in the future because of money's potential to grow in value over a given period of time. Money earning an interest rate is said to be compounding in value.
BREAKING DOWN 'Compound Interest'
Compound Interest Formula
Compound interest is calculated by multiplying the principal amount by one plus the annual interest rate raised to the number of compound periods minus one.The total initial amount of the loan is then subtracted from the resulting value.
Since the establishment of the CPA designation more than a hundred years ago, the CPA license has been granted by state board of accountancy in each of the 50+ US jurisdictions. There is never a license-granting centralized agency at the federal level. Because of this historical reason, each state may have slightly different requirements to sit for the exam.
The national associations of the CPA and state boards, known as the AICPA and NASBA, have work hard towards a uniform CPA exam and licensing requirements known as the 3Es. That is, Education, Exam and Experience.
For the CPA educational requirements, candidates should attain at least a 4-year bachelor degree, plus 150 general credit hours of higher education. Most states require a certain number of accounting and business courses. For the exam, all candidates must take the Uniform CPA exam administrated by the AICPA.
For experience, candidates are required to work in relevant field for at least a year, supervised and / or verified by a US CPA.
Do You Qualify?
The education system in your home country could be very different from that in the US. If you would like to know whether you fulfill the CPA educational requirements, be sure you watch the video above.
Questions are most welcome. Please drop me a comment or check out my website at http://ipassthecpaexam.com
A superior new replacement to traditional discounted cash flow valuation models
In the aftermath of the financial meltdown, the models commonly used for discounted cash flow valuation have become outdated, practically overnight. To meet the demand for an authoritative guidebook to the new economy, internationally recognized expert Kenneth Hackel has written Security Valuation and Risk Analysis.
Considering Necessary Details For Credit Risk FRM Part II.For more information on this video, and to sign-up for our 10-day Free CFA Course click here:-http://www.edupristine.com/courses/frm-garp-financial-risk-manager/frm-level-ii-trainings/
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Fundamental of Corporate Finance slideshareYin Sokheng
The objective of the course is to provide an understanding of both the theory of corporate finance fundamentals and how it applies to the “real” world. The main focus of this course is on the corporate financial manger and how he/she reaches decisions. We will cover many issues that are important to a modern financial manager including various advance topics in corporate finance fundamentals such as the essential concepts and understanding of the uses of financial statements and cash flows, ratio analysis, financial planning and growth, time value of money, bonds and stocks valuation, and project valuation.
Fundamental of Corporate Finance, chapter 1Yin Sokheng
The objective of the course is to provide an understanding of both the theory of corporate finance fundamentals and how it applies to the “real” world. The main focus of this course is on the corporate financial manger and how he/she reaches decisions. We will cover many issues that are important to a modern financial manager including various advance topics in corporate finance fundamentals such as the essential concepts and understanding of the uses of financial statements and cash flows, ratio analysis, financial planning and growth, time value of money, bonds and stocks valuation, and project valuation.
Which of the following activities involves raising the necessary funds.docxmaximapikvu8
Which of the following activities involves raising the necessary funds to support the business? operating marketing financing investing Which of the following is true regarding the statement of cash flows? Revenues are increases in economic resources that result from a business's operating activities. Investing activities involve collecting the necessary funds to operate the business. Financing activities for corporations include lending money and buying shares. The purchase of equipment is an example of a financing activity. Common shares represent the creditors' claims on the company. the total net income of the company to date. the amount paid by investors for ownership in the company. the owners' claims on the company. A statement of income reports the revenues and expenses for a specific period of time. summarizes the changes in retained earnings for a specific period of time. reports the changes in assets, liabilities, and shareholders' equity over a period of time. reports the assets, liabilities, and shareholders' equity at a specific date. The statement of changes in equity is dependent on the results from the statement of cash flows. the statement of income. the statement of financial position. a company's share capital. The accounting equation may be expressed as Assets = Liabilities + Shareholders' Equity. Assets + Shareholders' Equity = Liabilities. Assets + Liabilities = Shareholders' Equity. Assets = Shareholders' Equity Liabilities. A company's policy toward dividends and growth could best be determined by examining the statement of income. statement of cash flows. statement of changes in equity. statement of financial position. Which one of the following statements is false? The accounting equation can be expressed as: Assets - Shareholders' Equity = Liabilities. If the assets owned by a business total $100 , 000 and liabilities total $52 , 000 , shareholders' equity must total $48 , 000 . The basic accounting equation does not subdivide liabilities into two categories: claims of creditors and claims of the Canada Revenue Agency. The accounting equation can be expressed as: Assets + Liabilities = Shareholders' Equity. The common characteristic possessed by all assets is long life. tangible nature. great monetary value. future economic benefit. A corporation has which of the following set of characteristics? harder to raise funds and gives shareholders control easier to transfer ownership and raise funds, limited liability simple to set up and maintains control with founder shareholder control, income tax disadvantages, increased skills and resources
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5. The Balance-Sheet Model of the Firm How can the firm raise the money for the required investments? The Capital Structure Decision Current Assets Fixed Assets 1 Tangible 2 Intangible Shareholders’ Equity Current Liabilities Long-Term Debt
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7. Capital Structure The value of the firm can be thought of as a pie. The goal of the manager is to increase the size of the pie. The Capital Structure decision can be viewed as how best to slice up the pie. If how you slice the pie affects the size of the pie, then the capital structure decision matters. 50% Debt 50% Equity 25% Debt 75% Equity 70% Debt 30% Equity
8. Hypothetical Organization Chart Chairman of the Board and Chief Executive Officer (CEO) Board of Directors President and Chief Operating Officer (COO) Vice President and Chief Financial Officer (CFO) Treasurer Controller Cash Manager Capital Expenditures Credit Manager Financial Planning Tax Manager Financial Accounting Cost Accounting Data Processing
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10. The Firm and the Financial Markets Cash flow from firm (C) Taxes (D) Firm issues securities (A) Retained cash flows (F) Invests in assets (B) Dividends and debt payments (E) Current assets Fixed assets Short-term debt Long-term debt Equity shares Ultimately, the firm must be a cash generating activity. The cash flows from the firm must exceed the cash flows from the financial markets . Firm Government Financial markets
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12. Debt and Equity as Contingent Claims $F Debt holders are promised $ F . If the value of the firm is less than $ F , they get the whatever the firm if worth. If the value of the firm is more than $ F , debt holders get a maximum of $ F . If the value of the firm is less than $ F , share holders get nothing. If the value of the firm is more than $ F , share holders get everything above $ F . Algebraically, the bondholder’s claim is: Min[$ F ,$ X ] Algebraically, the shareholder’s claim is: Max[0,$ X – $ F ] $F Payoff to debt holders Value of the firm (X) $F Payoff to shareholders Value of the firm (X)
13. $F Debt holders are promised $ F . If the value of the firm is less than $ F , the shareholder’s claim is: Max[0,$ X – $ F ] = $0 and the debt holder’s claim is Min[$ F ,$ X ] = $ X . The sum of these is = $ X If the value of the firm is more than $ F , the shareholder’s claim is: Max[0,$ X – $ F ] = $ X – $ F and the debt holder’s claim is: Min[$ F ,$ X ] = $ F . The sum of these is = $ X Combined Payoffs to Debt and Equity $F Combined Payoffs to debt holders and shareholders Value of the firm (X) Payoff to debt holders Payoff to shareholders
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16. A Comparison of Partnership and Corporations Corporation Partnership Liquidity Shares can easily be exchanged. Subject to substantial restrictions. Voting Rights Usually each share gets one vote General Partner is in charge; limited partners may have some voting rights. Taxation Double Partners pay taxes on distributions. Reinvestment and dividend payout Broad latitude All net cash flow is distributed to partners. Liability Limited liability General partners may have unlimited liability. Limited partners enjoy limited liability. Continuity Perpetual life Limited life
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25. Separation of Ownership and Control Board of Directors Management Assets Debt Equity Shareholders Debtholders
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