Corporate Finance John Collins

What is Corporate Finance Finance is how executives manage revenues, expenses, and profits and indicates the success or failure of any venture. Rules and government regulations vary by country on how to account properly for assets and liabilities. Many disciplines within corporate finance Basic finance and accounting Understanding tax policies International finance

Importance of Finance Any business’s primary objective is to stay in business and the best way to do that is to make money Leaders must understand finance and ‘the numbers’ to keep businesses solvent Understanding finance also helps managers make better decisions inside their departments and outside of them, as well.

Financial Intelligence & Reading financial reports Three common reports Income statements Balance sheet Cash flow statement Profitability is measured in steps Gross profit Operating profit Net profit Mind the footnotes accounts will use to describe their methodology

Financial Intelligence & Reading financial reports Ratios allow comparing performance of companies in similar industries Return on Assets / Equity Leverage Operating Financial Liquidity Efficiency Days sales outstanding Return on sales Price to earnings

International Trade Many risks due to variability in country laws Product, production and transport risks. Commercial risks. Adverse business risks Political risks. Currency risks. Financial risks  Companies can exchange money across borders in different ways Bank Transfers Check Payment Documentary collection Letter of Credit

Security Analysis Three functions of security analysis Descriptive function Selective function Critical function Three classifications of securities each with its own criteria for sound investing Fixed-value securities Variable-value senior securities Common stocks

Exercise #1 Objective: Build skills in understanding how to read and understand financial reports.   The team should take 10 minutes to read through the same financial report of a public company. After reading discuss with the group the financial strengths and weaknesses of the company. Is this company a good investment based on its current stock price?