Summary Finance
Fleur Bongers
1
,Table of Contents
Summary Finance...............................................................................................................1
Fleur Bongers.....................................................................................................................1
Powerpoint 1/2............................................................................................................................3
Income statement...........................................................................................................................................3
Balance sheet..................................................................................................................................................4
Profit and Loss.................................................................................................................................................6
CAPM Model Capital Asset Pricing Model......................................................................................................7
Preformance Measures.................................................................................................................8
Return on Capital, EVA, and Return on Equity................................................................................................8
Profit Margin and Market-to-Book Ratio........................................................................................................9
Efficiency measures......................................................................................................................9
Leverage Measures.....................................................................................................................10
Liquidy Measures........................................................................................................................10
Powerpoint 3..............................................................................................................................12
Discounting.................................................................................................................................12
Bonds.........................................................................................................................................14
Bond Valuation..............................................................................................................................................15
Powerpoint 4..............................................................................................................................16
Simple interest VS. Compound interest........................................................................................................16
Future Value..................................................................................................................................................16
Growing Perpetuities....................................................................................................................................16
When Compounding.....................................................................................................................................17
Powerpoint 5/6..........................................................................................................................19
DCF................................................................................................................................................................19
Free Cash Flow..............................................................................................................................................20
Discount Factor.............................................................................................................................................20
Discounted Free Cashflow Valuation............................................................................................................21
Estimating Free Operating Cashflow.............................................................................................................21
Dividend discount models............................................................................................................................22
Estimating Dividend Yield.............................................................................................................................22
Payout Ratio / Plowback ratio and ROE........................................................................................................23
Key Concept: The Opportunity Cost of Capital.............................................................................................24
Key Concept: Weighted Average Cost of Capital..........................................................................................24
Growth and Horizon Stage............................................................................................................................24
Powerpoint 7/8..........................................................................................................................25
2
, Powerpoint 1/2
Definition Finance:
The management of money. Includes activities such as…
• Investing
• Borrowing & Lending
• Saving & Budgeting
• Forecasting
Main topics to know
• Income Statement and Balance Sheet Equations
(Net Income and ALOE)
• Net Present Value and Discounted Cashflow
(NPV and DCF)
• Capital Asset Pricing Model (CAPM)
The Profit & Loss Statement summarizes the firm’s
results of operation for the period
Net Income = Revenues – Expenses
Begins with Revenues
Deducts Expenses
Ends with Net Income
Income statement
Net Income = Revenues – Expenses
Calculate profits by deducting costs and
expenses from revenues.
The bottom-line figure, Net Income is
transferred to the statement of retained
earnings.
Expenses are matched with revenues on
the income statement.
EX: Cost of Goods Sold is an expense
matched with Sales.
Calculate Retained Earnings by adding Net Income and deducting Dividends from the
previous retained earnings.
Continues the story where the
Income Statement ends
Begins with previous period
Retained Earnings
Adds Net Income or deducts
Net Loss
Deducts Dividend
3
Fleur Bongers
1
,Table of Contents
Summary Finance...............................................................................................................1
Fleur Bongers.....................................................................................................................1
Powerpoint 1/2............................................................................................................................3
Income statement...........................................................................................................................................3
Balance sheet..................................................................................................................................................4
Profit and Loss.................................................................................................................................................6
CAPM Model Capital Asset Pricing Model......................................................................................................7
Preformance Measures.................................................................................................................8
Return on Capital, EVA, and Return on Equity................................................................................................8
Profit Margin and Market-to-Book Ratio........................................................................................................9
Efficiency measures......................................................................................................................9
Leverage Measures.....................................................................................................................10
Liquidy Measures........................................................................................................................10
Powerpoint 3..............................................................................................................................12
Discounting.................................................................................................................................12
Bonds.........................................................................................................................................14
Bond Valuation..............................................................................................................................................15
Powerpoint 4..............................................................................................................................16
Simple interest VS. Compound interest........................................................................................................16
Future Value..................................................................................................................................................16
Growing Perpetuities....................................................................................................................................16
When Compounding.....................................................................................................................................17
Powerpoint 5/6..........................................................................................................................19
DCF................................................................................................................................................................19
Free Cash Flow..............................................................................................................................................20
Discount Factor.............................................................................................................................................20
Discounted Free Cashflow Valuation............................................................................................................21
Estimating Free Operating Cashflow.............................................................................................................21
Dividend discount models............................................................................................................................22
Estimating Dividend Yield.............................................................................................................................22
Payout Ratio / Plowback ratio and ROE........................................................................................................23
Key Concept: The Opportunity Cost of Capital.............................................................................................24
Key Concept: Weighted Average Cost of Capital..........................................................................................24
Growth and Horizon Stage............................................................................................................................24
Powerpoint 7/8..........................................................................................................................25
2
, Powerpoint 1/2
Definition Finance:
The management of money. Includes activities such as…
• Investing
• Borrowing & Lending
• Saving & Budgeting
• Forecasting
Main topics to know
• Income Statement and Balance Sheet Equations
(Net Income and ALOE)
• Net Present Value and Discounted Cashflow
(NPV and DCF)
• Capital Asset Pricing Model (CAPM)
The Profit & Loss Statement summarizes the firm’s
results of operation for the period
Net Income = Revenues – Expenses
Begins with Revenues
Deducts Expenses
Ends with Net Income
Income statement
Net Income = Revenues – Expenses
Calculate profits by deducting costs and
expenses from revenues.
The bottom-line figure, Net Income is
transferred to the statement of retained
earnings.
Expenses are matched with revenues on
the income statement.
EX: Cost of Goods Sold is an expense
matched with Sales.
Calculate Retained Earnings by adding Net Income and deducting Dividends from the
previous retained earnings.
Continues the story where the
Income Statement ends
Begins with previous period
Retained Earnings
Adds Net Income or deducts
Net Loss
Deducts Dividend
3
