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Fundamentals of Finance Bob Donchez

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1 Fundamentals of Finance Bob Donchez
2/18/2018 CUBIC 2014 Section 1 Fundamentals of Finance Bob Donchez CUBIC Fundamentals of Finance

2 Fundamentals of Finance Topics
What is Finance? The measurement and study of an organization’s cash flows in order to make business decisions related to its: Operations Investments Financing Activities: Budgeting, planning, valuation, decisions

3 Fundamentals of Finance Topics
Course Objectives • a working knowledge of the terminology of finance and fundamental concepts and tools used in the business world; • an understanding of the interrelationships between accounting and finance; • an understanding of the interrelationships between business management and a firm's financial statements; • an introduction to financial markets, the time value of money, risk and return, and the valuation of assets and business projects.

4 Fundamentals of Finance Topics
1) Introduction to Financial Management Financial Decisions/Activities Careers in Finance Business Forms Financial Markets

5 Fundamentals of Finance Topics
2) Sources of capital funding for companies Retained profits Bonds and bank loans Stock

6 Fundamentals of Finance Topics
3) Financial Statements and Analysis Balance Sheet Income Statement Cash Flows Financial Analysis—Ratios Case #1: Financial Analysis: Vail Resorts

7 Fundamentals of Finance Topics
4) Capital Budgeting Introduction to Capital Budgeting Capital Budgeting Tools Determining Relevant Cash Flows Developing Cash Flow Projections Determining Cost of Capital Case #2: Business Start-up Decision: Naturally Wrapped Food Stand

8 What is your opinion of the field of finance?
A. I may pursue a career in finance B. I want to understand finance to better myself C. I find finance more of a “necessary evil” D. I really don’t see myself needing/using finance E. My opinion of finance is still “up in the air”

9 1-0 Introduction to Financial Management
Topics 1-1 Financial Decisions/Activities 1-2 Careers in Finance 1-3 Business Forms 1-4 Financial Markets

10 Financial activities and decisions can be divided into 3 areas:
Introduction to Financial Management 1-1 Financial Decisions/Activities Financial activities and decisions can be divided into 3 areas: Operating: Day to day operations to create profit Managing the income statement

11 Introduction to Financial Management 1-1 Financial Decisions/Activities
Financial activities and decisions can be divided into 3 areas: 2) Investing How is firm money spent on assets? Managing the left side of the Balance Sheet current assets--working capital management fixed assets--capital budgeting

12 Introduction to Financial Management 1-1 Financial Decisions/Activities
Financial activities and decisions can be divided into 3 areas: 3) Financing Focus on the sources of the Firm’s capital (debt and equity) Managing the right side of the Balance Sheet Amount and type of debt and equity--capital structure

13 Introduction to Financial Management 1-1 Financial Decisions/Activities

14 Introduction to Financial Management 1-2 Careers in Finance
Career Areas: Corporate Public and private companies, large and small Institutional Banks, insurance companies Investment Brokerage firms, investment banks Real estate International

15 Introduction to Financial Management 1-2 Careers in Finance
Career Considerations: Structured AND creative Quantitative AND strategic Financial knowledge can be used in: General business OR specialized finance areas

16 Introduction to Financial Management 1-2 Careers in Finance
Corporate finance careers—examples: Financial accountant Cash manager Credit manager Financial analyst Risk management Audit/fraud/compliance Budget director (budget, planning, and forecasting) Treasurer Director of finance Chief financial officer

17 Introduction to Financial Management 1-2 Careers in Finance
Institutional finance careers—examples: Investment banking analyst Trust officer Commercial bank loan officer Audit officer Banking analyst Branch manager Vice president

18 Introduction to Financial Management 1-2 Careers in Finance
Investment finance careers—examples: Financial advisor Stock broker Personal financial planning Financial analyst Security analyst Portfolio manager (mutual funds, hedge funds) Financial engineer

19 Introduction to Financial Management 1-2 Careers in Finance
Real estate finance careers—examples: Real estate broker Mortgage banker Appraisal/valuation analyst Leasing analyst Commercial broker

20 Introduction to Financial Management 1-2 Careers in Finance
International finance careers—examples: All of the previous careers outside the US Foreign exchange analyst International risk manager Finally: Financial Consulting Consulting on any of the above! On-line resource:

21 ) Do you seriously think you might start your own business sometime in your career? A. Yes B. No

22 Introduction to Financial Management 1-3 Business Forms
Sole Proprietorship Business owned by a single individual Partnership A business formed by two of more individuals or entities Corporation (“C” Corporation) A business created as a distinct legal entity owned by one or more individuals or entities.

23 Introduction to Financial Management 1-3 Business Forms
“Hybrids” Generally, smaller entities which allow for the pass through of income (single tax event) and have limited liability. Examples: Sub S Corporation General/Limited Partnership Limited Liability Partnership (LLP) Limited Liability Corporation (LLC)

24 Introduction to Financial Management 1-3 Business Forms
Item Sole Prop Partnership Corporation “Hybrids” Number Many Few Size Small Small-Medium Small-Large Liability Unlimited Limited Tax Pass Through Double taxed Owners Proprietor 2+ Partners Shareholders Partners or shareholders On-line resource:

25 Introduction to Financial Management 1-4 Financial Markets
Financial Intermediaries Connecting the producers of capital with the consumers of capital

26 Introduction to Financial Management 1-4 Financial Markets
Primarily versus secondary markets Primary markets—original issuance of securities to the market Secondary markets—all subsequent trading of securities


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