Samenvatting BER
Boek CFIN:
Part1: Introduction to managerial fnance
Hoofdstuk 1: An overview of managerial fnance
Part 2: Essential concepts in managerial fnance
Hoofdstuk 2: Analysis of fnancial statements
Hoofdstuk 3: The fnancial environment: markets institutions and investment banking
Hoofdstuk 4: Time value of money
Part 3: Valuation fnancial assets
Hoofdstuk 5: The cost of money (interest rates)
Hoofdstuk 6: Bonds (Debt) – characteristics and valuation
Hoofdstuk 7: Stocks (equity) – characteristics and valuation
Hoofdstuk 8: Risk and rates of return
Part 4: Valuation – real assets (capital budgeting techniques)
Hoofdstuk 9: Capital budgeting techniques
Hoofdstuk 10: Project cash fows and risk
Part 5: Cost of capital and capital structure concepts
Hoofdstuk 11: The cost of capital
Hoofdstuk 12: Capital structure
Hoofdstuk 13: Distribution of retained earnings: dividends and stock repurchases
,Hoofdstuk 1: An overview of managerial fnance
Finance: decisions about money how money is raised and used by business
governments and individuals.
Sound fnancial decisions:
More value is preferred to less;
The sooner cash is received the more valuable it is;
Less risky assets are more valuable than riskier assets.
Major functions investment area:
a) Determining the values risks and returns associated with such fnancial assets as
stocks and bonds;
b) Determining the optimal mix of securities that should be held in a portfolio of
investments.
Four P’s of marketing:
1. Price;
2. Product;
3. Place;
4. Promotion.
Three major forms of business organization:
1. Proprietorships (70 – 75%): an incorporated busines by one individual
+ It is easily and inexpensively formed;
+ It is subject to few government regulations;
+ It is taxed like an individual not like a corporation.
- The proprietor has unlimited personal liquidity for business debts because any
debts of the business are considered obligations of the owner;
- A proprietorship’s life is limited to the time the individual who created it owns the
business;
- Transferring ownership is somewhat difcult;
- It is difcult for a proprietorship to obtain large sums of capital because the frm’s
fnancial strength generally is based only on the fnancial strength of the sole
owner.
2. Partnerships (8 – 10%): the same as a proprietorship except that it has two or more
owners
- Each partner is liable for the debts of the business.
3. Corporations (15 – 20%): a legal entity created by a state which means that a
corporation has the authority to act like a person when conducting business.
+ A corporation ofer its owners limited liability;
+ Ownership interests can be divided into shares of stock which can be transferred
far more easily than can proprietorship or partnership interests.
+ A corporation can continue after its original owners and managers no longer have a
relationship with the business;
+ Much easier to raise money in the fnancial markets.
- Setting up a corporation as well as periodic fllings of required state and federal
reports is more complex and time – consuming for a proprietorship or a
partnership;
- Corporate earnings are subject to double taxation.
, Three hybrid business forms:
1. Limited liability partnership (LLP): a partnership where in at least one partner is
designated as a general partner with unlimited personal fnancial liabilty and the
other partner are limited partners whose liability is limited to amounts they invest in
the frm.
2. Limited liability company (LLC): ofers the personal limited liability associated with a
corporation. The company’s income is taxed like that of a partnership;
3. S corporation: a corporation with no more than 100 stockholders that elects to be
taxed in the same way as proprietorships and partnerships so that business income is
only taxed once.
Management’s primary goal -> stockholder wealth maximization: maximizing the
value of the frm as measured by the price of its common stock.
Earnings per share (EPS) = Net income (NI) / outstanding shares
Agency problem: a potential confict of interest between outside shareholders (owners)
and managers who make decisions about how to operate the frm.
Mechanisms used to motivate managers:
Managerial compensation (incentives);
Shareholder intervention;
Threat of hostile takeover.
Sarbance – Oxly act (2002):
1. Have a committee that consists of outside directors to oversee the frm’s audits;
2. Hire an external auditing frm;
3. Provide additional information.
Corporate governance: deals with the set of rules that a frm follows when conducting
business. These rules provide the “road map” that managers follow to persue the various
goals of the frm including maximizing its stockprice.
Boek CFIN:
Part1: Introduction to managerial fnance
Hoofdstuk 1: An overview of managerial fnance
Part 2: Essential concepts in managerial fnance
Hoofdstuk 2: Analysis of fnancial statements
Hoofdstuk 3: The fnancial environment: markets institutions and investment banking
Hoofdstuk 4: Time value of money
Part 3: Valuation fnancial assets
Hoofdstuk 5: The cost of money (interest rates)
Hoofdstuk 6: Bonds (Debt) – characteristics and valuation
Hoofdstuk 7: Stocks (equity) – characteristics and valuation
Hoofdstuk 8: Risk and rates of return
Part 4: Valuation – real assets (capital budgeting techniques)
Hoofdstuk 9: Capital budgeting techniques
Hoofdstuk 10: Project cash fows and risk
Part 5: Cost of capital and capital structure concepts
Hoofdstuk 11: The cost of capital
Hoofdstuk 12: Capital structure
Hoofdstuk 13: Distribution of retained earnings: dividends and stock repurchases
,Hoofdstuk 1: An overview of managerial fnance
Finance: decisions about money how money is raised and used by business
governments and individuals.
Sound fnancial decisions:
More value is preferred to less;
The sooner cash is received the more valuable it is;
Less risky assets are more valuable than riskier assets.
Major functions investment area:
a) Determining the values risks and returns associated with such fnancial assets as
stocks and bonds;
b) Determining the optimal mix of securities that should be held in a portfolio of
investments.
Four P’s of marketing:
1. Price;
2. Product;
3. Place;
4. Promotion.
Three major forms of business organization:
1. Proprietorships (70 – 75%): an incorporated busines by one individual
+ It is easily and inexpensively formed;
+ It is subject to few government regulations;
+ It is taxed like an individual not like a corporation.
- The proprietor has unlimited personal liquidity for business debts because any
debts of the business are considered obligations of the owner;
- A proprietorship’s life is limited to the time the individual who created it owns the
business;
- Transferring ownership is somewhat difcult;
- It is difcult for a proprietorship to obtain large sums of capital because the frm’s
fnancial strength generally is based only on the fnancial strength of the sole
owner.
2. Partnerships (8 – 10%): the same as a proprietorship except that it has two or more
owners
- Each partner is liable for the debts of the business.
3. Corporations (15 – 20%): a legal entity created by a state which means that a
corporation has the authority to act like a person when conducting business.
+ A corporation ofer its owners limited liability;
+ Ownership interests can be divided into shares of stock which can be transferred
far more easily than can proprietorship or partnership interests.
+ A corporation can continue after its original owners and managers no longer have a
relationship with the business;
+ Much easier to raise money in the fnancial markets.
- Setting up a corporation as well as periodic fllings of required state and federal
reports is more complex and time – consuming for a proprietorship or a
partnership;
- Corporate earnings are subject to double taxation.
, Three hybrid business forms:
1. Limited liability partnership (LLP): a partnership where in at least one partner is
designated as a general partner with unlimited personal fnancial liabilty and the
other partner are limited partners whose liability is limited to amounts they invest in
the frm.
2. Limited liability company (LLC): ofers the personal limited liability associated with a
corporation. The company’s income is taxed like that of a partnership;
3. S corporation: a corporation with no more than 100 stockholders that elects to be
taxed in the same way as proprietorships and partnerships so that business income is
only taxed once.
Management’s primary goal -> stockholder wealth maximization: maximizing the
value of the frm as measured by the price of its common stock.
Earnings per share (EPS) = Net income (NI) / outstanding shares
Agency problem: a potential confict of interest between outside shareholders (owners)
and managers who make decisions about how to operate the frm.
Mechanisms used to motivate managers:
Managerial compensation (incentives);
Shareholder intervention;
Threat of hostile takeover.
Sarbance – Oxly act (2002):
1. Have a committee that consists of outside directors to oversee the frm’s audits;
2. Hire an external auditing frm;
3. Provide additional information.
Corporate governance: deals with the set of rules that a frm follows when conducting
business. These rules provide the “road map” that managers follow to persue the various
goals of the frm including maximizing its stockprice.
