Summary
Corporate
Finance
Made by Lennard Schoemaker
Based on The fundamentals of financial managment 13th edition
,Contents
General information per.......................................................................................................................... 4
Chapter 1 ............................................................................................................................................. 4
Definitions Ch1 ................................................................................................................................ 4
Chapter 6 ............................................................................................................................................. 5
Definitions Chapter 6....................................................................................................................... 5
Chapter 3 ............................................................................................................................................. 6
Definitions Chapter 3....................................................................................................................... 6
Chapter 4 ............................................................................................................................................. 7
Definitions Chapter 4....................................................................................................................... 7
Chapter 5 ............................................................................................................................................. 8
Definitions Chapter 5....................................................................................................................... 8
Chapter 7 ........................................................................................................................................... 10
Definitions Chapter 7..................................................................................................................... 10
Chapter 8 ........................................................................................................................................... 10
Defections Chapter 8 ..................................................................................................................... 10
Chapter 12 ......................................................................................................................................... 11
Definitions Chapter 12................................................................................................................... 11
Chapter 13 ......................................................................................................................................... 11
Definitions Chapter 13................................................................................................................... 11
Chapter 15 -> Important.................................................................................................................... 12
Definitions Chapter 15................................................................................................................... 12
Chapter 16 ......................................................................................................................................... 13
Definitions Chapter 16................................................................................................................... 13
Chapter 17 ......................................................................................................................................... 14
Definitions Chapter 17................................................................................................................... 14
Formulas ................................................................................................................................................ 16
Definition of 'Weighted Average Cost Of Capital - WACC' ................................................................ 16
Definition of 'Cash Conversion Cycle - CCC' ...................................................................................... 16
Definition of 'Days Sales Of Inventory - DSI'/ DIO ............................................................................. 17
Definition of 'Days Sales Outstanding - DSO' .................................................................................... 17
Definition of 'Days Payable Outstanding - DPO'................................................................................ 18
Definition of 'Net Present Value - NPV' ............................................................................................. 18
Definition of 'Present Value - PV' ...................................................................................................... 19
, Definition of 'Internal Rate Of Return - IRR' ...................................................................................... 19
Definition of 'Required Rate Of Return - RRR' ................................................................................... 19
Investopedia explains 'Required Rate Of Return - RRR' ................................................................ 20
Definition of 'Economic Value Added - EVA' ..................................................................................... 20
Definition of 'Profitability Index' ....................................................................................................... 20
Definition of 'Return On Investment - ROI' ....................................................................................... 21
Definition of 'Payback Period' ........................................................................................................... 21
Definition of 'Earnings Before Interest & Tax - EBIT'......................................................................... 21
Definition of 'Cost Of Goods Sold - COGS' ......................................................................................... 22
Definition of 'Capital Asset Pricing Model - CAPM' ........................................................................... 22
Definition of ‘Depreciation Tax Shield’ – DTS.................................................................................... 22
Formulas Financial Accounting .............................................................................................................. 23
Basic Information Corporate Finance.................................................................................................... 26
Cash Flow And Relationships Between Financial Statement - Free Cash Flow ............................. 28
Definition of 'Cost Of Equity' ......................................................................................................... 28
Definition of 'Cost Of Debt' ........................................................................................................... 29
Future Value .................................................................................................................................. 29
Present Value ................................................................................................................................ 30
Discounted Cash Flow Valuation - Perpetuities ............................................................................ 33
Net Present Value And Internal Rate Of Return - Introduction To Net Present Value And Internal
Rate Of Return ............................................................................................................................... 33
Net Present Value And Internal Rate Of Return - Profitability Index ............................................ 34
Calculating the Cost of Equity........................................................................................................ 35
Cost Of Capital - Cost Of Debt And Preferred Stock .............................................................. 37
Financial Leverage And Capital Structure Policy ........................................................................... 38
Financial Leverage And Capital Structure Policy - Financial Leverage .......................................... 39
, General information per
The summary is made in the order that was used in the lectures. For an overview of the order please
check the syllabus that was provided at the beginning of the course.
In order to maintain clarity about the definitons the following marks have been made.
Green = Definition related to a formula
Yellow = Important information which has been frequently been used in cases/Questions
Gray = Alternative way of defining the term
Besides the summary of the definitions there is also an overview of the Financial Accounting
formulas and an overview of all important subjects + formulas of CF.
Chapter 1
Definitions Ch1
Financial Management
o Financial management is concerned with the acquisition, financing, and management
of assets with some overall goal in mind.
o Financial management can be broken down into three major areas: The investment,
financing, and asset management decisions.
Dividend payout ratio
o Annual cash dividend divided by annual earning
o Dividends per share divided by earning per share
o The ration indicates the percentage of a company’s earnings that is paid out to
shareholder in cash
Profit maximization
o Maximizing a firms earnings after taxes (EAT)
o Profit maximization is one of the most common and proper objectives of a firm that
operates on a profit basis
Earnings per share (EPS)
o Earnings after taxes (EAT) divided by the number of common share outstanding
Agent(s)
o Individual authorized by another person, called the principal, to act on the latter’s
behalf
Agency (theory)
o A branch of economics relating to the behavior of principals (such as their owners)
and their agents (such as managers)
Corporate social responsibility (CSR)
o A business outlook that acknowledges a firm’s responsibilities to its stakeholders and
the natural environments.
Stakeholders
o All constituencies with a stake in the fortunes of the company. They include
shareholder, creditors, customers, employees, suppliers, and local and international
communities in which the firm operates.
Sustainability
Corporate
Finance
Made by Lennard Schoemaker
Based on The fundamentals of financial managment 13th edition
,Contents
General information per.......................................................................................................................... 4
Chapter 1 ............................................................................................................................................. 4
Definitions Ch1 ................................................................................................................................ 4
Chapter 6 ............................................................................................................................................. 5
Definitions Chapter 6....................................................................................................................... 5
Chapter 3 ............................................................................................................................................. 6
Definitions Chapter 3....................................................................................................................... 6
Chapter 4 ............................................................................................................................................. 7
Definitions Chapter 4....................................................................................................................... 7
Chapter 5 ............................................................................................................................................. 8
Definitions Chapter 5....................................................................................................................... 8
Chapter 7 ........................................................................................................................................... 10
Definitions Chapter 7..................................................................................................................... 10
Chapter 8 ........................................................................................................................................... 10
Defections Chapter 8 ..................................................................................................................... 10
Chapter 12 ......................................................................................................................................... 11
Definitions Chapter 12................................................................................................................... 11
Chapter 13 ......................................................................................................................................... 11
Definitions Chapter 13................................................................................................................... 11
Chapter 15 -> Important.................................................................................................................... 12
Definitions Chapter 15................................................................................................................... 12
Chapter 16 ......................................................................................................................................... 13
Definitions Chapter 16................................................................................................................... 13
Chapter 17 ......................................................................................................................................... 14
Definitions Chapter 17................................................................................................................... 14
Formulas ................................................................................................................................................ 16
Definition of 'Weighted Average Cost Of Capital - WACC' ................................................................ 16
Definition of 'Cash Conversion Cycle - CCC' ...................................................................................... 16
Definition of 'Days Sales Of Inventory - DSI'/ DIO ............................................................................. 17
Definition of 'Days Sales Outstanding - DSO' .................................................................................... 17
Definition of 'Days Payable Outstanding - DPO'................................................................................ 18
Definition of 'Net Present Value - NPV' ............................................................................................. 18
Definition of 'Present Value - PV' ...................................................................................................... 19
, Definition of 'Internal Rate Of Return - IRR' ...................................................................................... 19
Definition of 'Required Rate Of Return - RRR' ................................................................................... 19
Investopedia explains 'Required Rate Of Return - RRR' ................................................................ 20
Definition of 'Economic Value Added - EVA' ..................................................................................... 20
Definition of 'Profitability Index' ....................................................................................................... 20
Definition of 'Return On Investment - ROI' ....................................................................................... 21
Definition of 'Payback Period' ........................................................................................................... 21
Definition of 'Earnings Before Interest & Tax - EBIT'......................................................................... 21
Definition of 'Cost Of Goods Sold - COGS' ......................................................................................... 22
Definition of 'Capital Asset Pricing Model - CAPM' ........................................................................... 22
Definition of ‘Depreciation Tax Shield’ – DTS.................................................................................... 22
Formulas Financial Accounting .............................................................................................................. 23
Basic Information Corporate Finance.................................................................................................... 26
Cash Flow And Relationships Between Financial Statement - Free Cash Flow ............................. 28
Definition of 'Cost Of Equity' ......................................................................................................... 28
Definition of 'Cost Of Debt' ........................................................................................................... 29
Future Value .................................................................................................................................. 29
Present Value ................................................................................................................................ 30
Discounted Cash Flow Valuation - Perpetuities ............................................................................ 33
Net Present Value And Internal Rate Of Return - Introduction To Net Present Value And Internal
Rate Of Return ............................................................................................................................... 33
Net Present Value And Internal Rate Of Return - Profitability Index ............................................ 34
Calculating the Cost of Equity........................................................................................................ 35
Cost Of Capital - Cost Of Debt And Preferred Stock .............................................................. 37
Financial Leverage And Capital Structure Policy ........................................................................... 38
Financial Leverage And Capital Structure Policy - Financial Leverage .......................................... 39
, General information per
The summary is made in the order that was used in the lectures. For an overview of the order please
check the syllabus that was provided at the beginning of the course.
In order to maintain clarity about the definitons the following marks have been made.
Green = Definition related to a formula
Yellow = Important information which has been frequently been used in cases/Questions
Gray = Alternative way of defining the term
Besides the summary of the definitions there is also an overview of the Financial Accounting
formulas and an overview of all important subjects + formulas of CF.
Chapter 1
Definitions Ch1
Financial Management
o Financial management is concerned with the acquisition, financing, and management
of assets with some overall goal in mind.
o Financial management can be broken down into three major areas: The investment,
financing, and asset management decisions.
Dividend payout ratio
o Annual cash dividend divided by annual earning
o Dividends per share divided by earning per share
o The ration indicates the percentage of a company’s earnings that is paid out to
shareholder in cash
Profit maximization
o Maximizing a firms earnings after taxes (EAT)
o Profit maximization is one of the most common and proper objectives of a firm that
operates on a profit basis
Earnings per share (EPS)
o Earnings after taxes (EAT) divided by the number of common share outstanding
Agent(s)
o Individual authorized by another person, called the principal, to act on the latter’s
behalf
Agency (theory)
o A branch of economics relating to the behavior of principals (such as their owners)
and their agents (such as managers)
Corporate social responsibility (CSR)
o A business outlook that acknowledges a firm’s responsibilities to its stakeholders and
the natural environments.
Stakeholders
o All constituencies with a stake in the fortunes of the company. They include
shareholder, creditors, customers, employees, suppliers, and local and international
communities in which the firm operates.
Sustainability
