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

2. 1- 2 © ADMN 4116, Anton Miglo 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. 1- 3 © ADMN 4116, Anton Miglo 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. 1- 4 © ADMN 4116, Anton Miglo Organizational comments  Stock Track Investment Management exercise: interaction, strategy, creativity  Group projects: cases

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6. 1- 6 © ADMN 4116, Anton Miglo Please! 1.Don’t …. 2.Turn it off!

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9. 1- 9 © ADMN 4116, Anton Miglo Topics  Introduction  Types of securities  Risk and Return  CAPM and Portfolio Management  Fixed-Income Securities  Equity Analysis  Options, Futures and Forwards  Advanced Topics

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11. 1- 11 © ADMN 4116, Anton Miglo Lecture 1:  Money and finance  Types of business organization  Financial decisions and corporate organization chart  Financial information versus accounting reports  Introduction to Excel Topics Covered

12. 1- 12 © ADMN 4116, Anton Miglo Money and Finance

13. 1- 13 © ADMN 4116, Anton Miglo Projects

14. 1- 14 © ADMN 4116, Anton Miglo Securities

15. 1- 15 © ADMN 4116, Anton Miglo Forms of Business Organization Sole proprietorship Partnership Corporation Ease of formation/ termination Easy Relatively Easy Complex Life of a firmTermination or death Death or withdrawal of partners In perpetuity Owners liability Unlimited Usually unlimited Limited Separate legal entity No Yes Degree of controlComplete StrongSeparation of control and ownership Taxes Based on personal Income taxesCorporate Income Tax & tax on dividends Transfer of ownership LimitedRequires agreement of the partners Unlimited

16. 1- 16 © ADMN 4116, Anton Miglo Organization Chart Board of Directors CFO GM Production Treasurer: raising capital banking relationship CEO GM Marketing Controller: Prepares financial statements and budgets, Internal accounting, taxes

17. 1- 17 © ADMN 4116, Anton Miglo The Balance Sheet (Accounting View) = Cash 42 Receivable 86 Inventory 14 Short-term Investments 15 Fixed Assets 902 Intangible Assets 85 Total Assets 1,144 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 ASSETS LIAB&EQUITY Book Values!!!!

18. 1- 18 © ADMN 4116, Anton Miglo The Financial View of the Firm = Assets in place 1,144 Growth Assets 140 Total Assets 1,284 Debt 684 Equity 600 Liab&Shareholders’ Equity 1,284 ASSETS LIAB&EQUITY Market Values!!!!

19. 1- 19 © ADMN 4116, Anton Miglo Income Statement Sales 1,301.00 Cost of Googs sold 1,031.00 EBITDA 270.00 Depreciation & Amortization 140.00 EBIT 130.00 Net interest expense 10 Income Before Taxes 120.00 Income Taxes 29.00 Net Income After Taxes 91.00 Cash Dividends22.00 Retained earnings69.00

20. 1- 20 © ADMN 4116, Anton Miglo 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. 1- 21 © ADMN 4116, Anton Miglo Introduction to Excel  Basic basics about Excel!  Can probably be skipped! Most students know this materials

22. 1- 22 © ADMN 4116, Anton Miglo Getting started  You’ve managed to open Excel Excel buttonOffice button on desktop

23. 1- 23 © ADMN 4116, Anton Miglo 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. 1- 24 © ADMN 4116, Anton Miglo 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. 1- 25 © ADMN 4116, Anton Miglo Some rules for financial modeling  These rules will help you build better spreadsheets  Readibility, Logic, Simplicity—this is what you should strive for

26. 1- 26 © ADMN 4116, Anton Miglo Try to put important variables in one place

27. 1- 27 © ADMN 4116, Anton Miglo Don’t hard-wire numbers  Use formulas instead of numbers

28. 1- 28 © ADMN 4116, Anton Miglo Avoid using blank columns to accommodate cell “spillovers”

29. 1- 29 © ADMN 4116, Anton Miglo Do not forget to name your spreadsheets UGLY!! You can name sheets by clicking on the sheet tab.

30. 1- 30 © ADMN 4116, Anton Miglo 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. 1- 31 © ADMN 4116, Anton Miglo You may have to tinker with your spreadsheet Security settings!

32. 1- 32 © ADMN 4116, Anton Miglo You’ve got a blank spreadsheet  Save it! (all the time!) 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 Where should you save it?  My documents  Special folder?  Anton/Junk is a folder I’ve created

33. 1- 33 © ADMN 4116, Anton Miglo Formatting the numbers Mark numbers to be formatted Press right mouse button and choose Format Cells

34. 1- 34 © ADMN 4116, Anton Miglo Relative versus absolute copying Relative copying Absolute copying

35. 1- 35 © ADMN 4116, Anton Miglo First spreadsheet How does an investment of $1000 grow over time with 15% annual interest? Note formula in cell and in Formula Bar

36. 1- 36 © ADMN 4116, Anton Miglo Copying the formula by dragging The result

37. 1- 37 © ADMN 4116, Anton Miglo 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. 1- 38 © ADMN 4116, Anton Miglo 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. 1- 39 © ADMN 4116, Anton Miglo Shortcut There’s a shortcut to this format (2 decimals, comma): Ctrl+Shift+!

40. 1- 40 © ADMN 4116, Anton Miglo 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. 1- 41 © ADMN 4116, Anton Miglo Digression: Shortcuts in Excel  Many!  F1: Help  F2: Edit cell  F4: Repeat last action  F2, then F4: change from relative to absolute copying 41

42. 1- 42 © ADMN 4116, Anton Miglo [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 42

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