Inhoudsopgave
CH.1 Goals and governance of the corporation...............................................................................................3
1.1 Investments and financing decisions..............................................................................................................3
1.2 What is a corporation?...................................................................................................................................4
1.3 Financial manager(s)......................................................................................................................................5
1.4 Goals of the corporation.................................................................................................................................6
1.5 Agency problems, executive compensation and corporate governance........................................................6
1.5 Corporate governance....................................................................................................................................7
1.6 Ethics of maximizing value.............................................................................................................................7
TEST H1.................................................................................................................................................................7
CH.2 Financial markets and institutions.......................................................................................................... 9
2.1 The importance of financial markets (where to get our money?)................................................................10
2.2 The flow of savings to corporations.............................................................................................................10
2.2 Structure of financial markets – Overview...................................................................................................11
2.3 Functions of financial markets......................................................................................................................13
TEST H2...............................................................................................................................................................14
CH. 3 Accounting – bank balance sheet........................................................................................................ 14
3.1 The bank balance sheet - Sources of funding (liabilities).............................................................................14
3.1 The bank balance sheet - Usage of funding (assets)....................................................................................15
3.2 Banks creating money..................................................................................................................................17
3.3 General principles of bank management - Capital adequacy management................................................18
3.1 The bank balance sheet - Leverage & capital ratio......................................................................................19
3.3 General principles of bank management - Capital adequacy management – example..............................19
Ch. 5 The time value of money.................................................................................................................... 20
5.1 Future values and compound interest..........................................................................................................20
5.2 present values...............................................................................................................................................21
Time value of money (applications)....................................................................................................................22
5.3 Future value of multiple cash flows..............................................................................................................23
5.5 Perpetuities and annuities............................................................................................................................24
5.5 Annuities due................................................................................................................................................26
5.7 Effective interest rates..................................................................................................................................27
5.8 Inflation.........................................................................................................................................................27
TEST H5...............................................................................................................................................................28
Ch. 6 Valuing Bonds..................................................................................................................................... 31
6.1 Bonds............................................................................................................................................................31
6.1 Bonds at inception/creation.........................................................................................................................31
1
, 6.2 Interest rates and bond prices......................................................................................................................32
6.3 Bond yields....................................................................................................................................................34
6.4 Bond rates of returns....................................................................................................................................34
6.5 The yield curve..............................................................................................................................................35
6.6 Corporate bonds and the risk of default.......................................................................................................36
TEST H6...............................................................................................................................................................37
Ch. 7 Valuing stock....................................................................................................................................... 41
7.1 Stocks and the stock market.........................................................................................................................41
7.2 Market values, book values and liquidation values.....................................................................................42
7.3 Valuing common stocks................................................................................................................................42
7.4 Simplifying the dividend discount model......................................................................................................44
7.5 Discounted cash flow calculations................................................................................................................45
7.6 No free lunches.............................................................................................................................................46
7.7 Market anomalies and behavioral finance...................................................................................................46
7.7 Efficient-market theory.................................................................................................................................46
TEST H7...............................................................................................................................................................47
CH. 14 Introduction to Corporate Finance..................................................................................................... 49
14.1 Creating Value with financing....................................................................................................................49
14.2 Patterns of corporate financing..................................................................................................................50
14.2 Sources of funds..........................................................................................................................................50
14.2 Patterns of corporate financing..................................................................................................................50
14.3 Common stock - read..................................................................................................................................51
14.4 Preferred stock............................................................................................................................................52
14.5 Corporate debt............................................................................................................................................53
14.6 Convertible securities..................................................................................................................................54
14. EXTRA - Mutual Funds............................................................................................................................ 55
14E Why mutual funds?......................................................................................................................................55
14E.1 Why mutual funds?...................................................................................................................................55
14E.2 How (mutual) funds work.........................................................................................................................56
14E.2 How funds can earn you money...............................................................................................................56
14E.2 Net asset value = overall value.................................................................................................................56
14E.3 Characteristics of funds............................................................................................................................56
14E.3 Open-ended versus closed funds..............................................................................................................57
14E.4 Different types of funds............................................................................................................................57
14E.5 Advantages and disadvantages................................................................................................................58
14E.7 Some final remarks...................................................................................................................................58
TEST H14.............................................................................................................................................................58
2
,CH. 15 Venture capital and IPO’s.................................................................................................................. 60
15.1 Venture capital (VC) – What?.....................................................................................................................60
15.1 Venture capital – Who?..............................................................................................................................61
15.1 Venture capital – How ? p. 422..................................................................................................................61
15.1 Venture capital – How ? p. 443..................................................................................................................61
15.1 Venture capital – crowdfunding.................................................................................................................62
15.2 The initial public offering (IPO) – when you go public for the 1 st time.......................................................62
15.3 General cash offers.....................................................................................................................................65
TEST H15.............................................................................................................................................................66
CH. 22 International Financial Management................................................................................................. 69
22.1 Foreign exchange markets.........................................................................................................................69
22.3 Hedging currency risk.................................................................................................................................70
TEST H22.............................................................................................................................................................71
MOCK EXAM................................................................................................................................................ 72
CH.1 Goals and governance of the corporation
1.1 Investments and financing decisions
“What are the 2 major decisions made by financial managers?”
3
, Investment decision = capital budgeting
-Also called CAPEX (capital expenditures) è What to do with our money?
-Tangible or intangible
-What will we “acquire” with our money?
-= purchase of assets
Financing decisions
-Raising money from investors
-Equity versus Debt è Where to get our money?
-Short term versus Long term (~Raising capital)
-= sale of financial assets
TEST/ budgeting or financial decisions:
a. Intel decides to spend 7billion to develop a new microprocessor factory
à budgeting
b. BMW borrows 350million from deutsche bank
à financial
c. Rds constructs a pipeline to bring natural gas onshore from a production platform in australia
à budgeting
d. Pfizer issues new shared to buy a small biotech company
à budgeting & financial
Real assets: Assets used to produce goods and services.
Financial assets: Financial claims to the income generated by the firm’s real assets.
TEST/ financial or real asset:
a. A patent
à real
b. A share of stock issues by Wells Fargo Bank
à financial
c. A mortgage loan taken out to help pay for a new home
à financial
d. After a successful advertising campaign, potential customers trust FedEx to deliver packages
promptly and reliably
à real
e. I Owe You from brother in law
à financial
1.2 What is a corporation?
Articles of incorporation (=legal docs)
-Purpose and governance
Incorporation is the first process to be followed legally to register a company as Corporations
4
CH.1 Goals and governance of the corporation...............................................................................................3
1.1 Investments and financing decisions..............................................................................................................3
1.2 What is a corporation?...................................................................................................................................4
1.3 Financial manager(s)......................................................................................................................................5
1.4 Goals of the corporation.................................................................................................................................6
1.5 Agency problems, executive compensation and corporate governance........................................................6
1.5 Corporate governance....................................................................................................................................7
1.6 Ethics of maximizing value.............................................................................................................................7
TEST H1.................................................................................................................................................................7
CH.2 Financial markets and institutions.......................................................................................................... 9
2.1 The importance of financial markets (where to get our money?)................................................................10
2.2 The flow of savings to corporations.............................................................................................................10
2.2 Structure of financial markets – Overview...................................................................................................11
2.3 Functions of financial markets......................................................................................................................13
TEST H2...............................................................................................................................................................14
CH. 3 Accounting – bank balance sheet........................................................................................................ 14
3.1 The bank balance sheet - Sources of funding (liabilities).............................................................................14
3.1 The bank balance sheet - Usage of funding (assets)....................................................................................15
3.2 Banks creating money..................................................................................................................................17
3.3 General principles of bank management - Capital adequacy management................................................18
3.1 The bank balance sheet - Leverage & capital ratio......................................................................................19
3.3 General principles of bank management - Capital adequacy management – example..............................19
Ch. 5 The time value of money.................................................................................................................... 20
5.1 Future values and compound interest..........................................................................................................20
5.2 present values...............................................................................................................................................21
Time value of money (applications)....................................................................................................................22
5.3 Future value of multiple cash flows..............................................................................................................23
5.5 Perpetuities and annuities............................................................................................................................24
5.5 Annuities due................................................................................................................................................26
5.7 Effective interest rates..................................................................................................................................27
5.8 Inflation.........................................................................................................................................................27
TEST H5...............................................................................................................................................................28
Ch. 6 Valuing Bonds..................................................................................................................................... 31
6.1 Bonds............................................................................................................................................................31
6.1 Bonds at inception/creation.........................................................................................................................31
1
, 6.2 Interest rates and bond prices......................................................................................................................32
6.3 Bond yields....................................................................................................................................................34
6.4 Bond rates of returns....................................................................................................................................34
6.5 The yield curve..............................................................................................................................................35
6.6 Corporate bonds and the risk of default.......................................................................................................36
TEST H6...............................................................................................................................................................37
Ch. 7 Valuing stock....................................................................................................................................... 41
7.1 Stocks and the stock market.........................................................................................................................41
7.2 Market values, book values and liquidation values.....................................................................................42
7.3 Valuing common stocks................................................................................................................................42
7.4 Simplifying the dividend discount model......................................................................................................44
7.5 Discounted cash flow calculations................................................................................................................45
7.6 No free lunches.............................................................................................................................................46
7.7 Market anomalies and behavioral finance...................................................................................................46
7.7 Efficient-market theory.................................................................................................................................46
TEST H7...............................................................................................................................................................47
CH. 14 Introduction to Corporate Finance..................................................................................................... 49
14.1 Creating Value with financing....................................................................................................................49
14.2 Patterns of corporate financing..................................................................................................................50
14.2 Sources of funds..........................................................................................................................................50
14.2 Patterns of corporate financing..................................................................................................................50
14.3 Common stock - read..................................................................................................................................51
14.4 Preferred stock............................................................................................................................................52
14.5 Corporate debt............................................................................................................................................53
14.6 Convertible securities..................................................................................................................................54
14. EXTRA - Mutual Funds............................................................................................................................ 55
14E Why mutual funds?......................................................................................................................................55
14E.1 Why mutual funds?...................................................................................................................................55
14E.2 How (mutual) funds work.........................................................................................................................56
14E.2 How funds can earn you money...............................................................................................................56
14E.2 Net asset value = overall value.................................................................................................................56
14E.3 Characteristics of funds............................................................................................................................56
14E.3 Open-ended versus closed funds..............................................................................................................57
14E.4 Different types of funds............................................................................................................................57
14E.5 Advantages and disadvantages................................................................................................................58
14E.7 Some final remarks...................................................................................................................................58
TEST H14.............................................................................................................................................................58
2
,CH. 15 Venture capital and IPO’s.................................................................................................................. 60
15.1 Venture capital (VC) – What?.....................................................................................................................60
15.1 Venture capital – Who?..............................................................................................................................61
15.1 Venture capital – How ? p. 422..................................................................................................................61
15.1 Venture capital – How ? p. 443..................................................................................................................61
15.1 Venture capital – crowdfunding.................................................................................................................62
15.2 The initial public offering (IPO) – when you go public for the 1 st time.......................................................62
15.3 General cash offers.....................................................................................................................................65
TEST H15.............................................................................................................................................................66
CH. 22 International Financial Management................................................................................................. 69
22.1 Foreign exchange markets.........................................................................................................................69
22.3 Hedging currency risk.................................................................................................................................70
TEST H22.............................................................................................................................................................71
MOCK EXAM................................................................................................................................................ 72
CH.1 Goals and governance of the corporation
1.1 Investments and financing decisions
“What are the 2 major decisions made by financial managers?”
3
, Investment decision = capital budgeting
-Also called CAPEX (capital expenditures) è What to do with our money?
-Tangible or intangible
-What will we “acquire” with our money?
-= purchase of assets
Financing decisions
-Raising money from investors
-Equity versus Debt è Where to get our money?
-Short term versus Long term (~Raising capital)
-= sale of financial assets
TEST/ budgeting or financial decisions:
a. Intel decides to spend 7billion to develop a new microprocessor factory
à budgeting
b. BMW borrows 350million from deutsche bank
à financial
c. Rds constructs a pipeline to bring natural gas onshore from a production platform in australia
à budgeting
d. Pfizer issues new shared to buy a small biotech company
à budgeting & financial
Real assets: Assets used to produce goods and services.
Financial assets: Financial claims to the income generated by the firm’s real assets.
TEST/ financial or real asset:
a. A patent
à real
b. A share of stock issues by Wells Fargo Bank
à financial
c. A mortgage loan taken out to help pay for a new home
à financial
d. After a successful advertising campaign, potential customers trust FedEx to deliver packages
promptly and reliably
à real
e. I Owe You from brother in law
à financial
1.2 What is a corporation?
Articles of incorporation (=legal docs)
-Purpose and governance
Incorporation is the first process to be followed legally to register a company as Corporations
4
