INTRODUCTION TO BUSINESS FINANCE Zoubida SAMLAL - MBA, CFA Member, PHD candidate for HBS program
WHAT IS FINANCE ? It is the study or the process of how to allocate ressources through time. Four questions or problematics are to be tackled 1.How much to save ? 2.How to fructify or generate return on saving? 3.When and How much to finance? 4.How to manage risk?
Mathematical sciences Social Sciences Finance WHAT IS FINANCE ? 1.Algebra 2.Algorithm 3.Probabilities 4.Statitics 1- Psychology 2- Sociology 3- Geopolitics 4- Religion
FOUR AREAS OF FINANCE Finance + Government = Public Finance( spending, budget and revenues) Finance +Households = Personal Finance Finance + Enterprises= Corporate Finance Finance + Markets= Financial Markets Risk Management
Budget positions creating financial needs of economic units: Surplus or deficit. Surplus spending units ( SSUs) have income for the period that exceeds spending, resulting in savings. – Other words for “SSU” are saver, lender, or investor. Most SSUs are households. Deficit spending units (DSUs) have spending for the period that exceeds income. – Another word for “DSU” is “borrower”. Most DSUs are businesses or governments. FINANCE AND ECONOMIC AGENTS
Finance Deficit Spending Units Surplus Spending Units InvestmentFinancing Households Enterprises Governments FINANCE AND ECONOMIC AGENTS