FIN-200 notes
Monday/Wednesday 8:00-9:15
Lecture #1: 9/9:
Lecture Note 1:
● Time Value of money
What matters when it comes to money?
○ The amount
○ The timing (we prefer to receive money sooner, and pay later. This is what we
call the time value of money)
● Moving cash flows over time
○ Present Value = PV
○ Future Value = FV
● PV x (1 + growth rate)^n = FV (n=# of periods compounded)
● One equation and four variables: Any problem that involves lump sums. For example:
a single outflow and a single inflow
● Applications:
○ Savings for retirement. Your retirement goal is x. The bank offers you a rate of
6%. How much do you need to save, in order to reach y amount, after 40
years?
○ Cost of a loan. Person needs x amount for a college loan. The bank offers it at
5% interest. If this person borrows x amount today, and pays it back over 10
years, how much will they need to pay back?
Lecture Note 2:
● Future Value of multiple payment streams - unequal periodic cash payments, treat
each as a part of a lump sum, and calculate its future value, over relative periods
● Sum up the individual future values, to get the future value of multiple payment
streams
● Examples: $3,000 at 10%, over a 3 year period. This is followed up with payments of
$5,000, $7,000, and $9,000, and the end of each year. Calculate the net amount in the
account, after 3 years.
● You are able to calculate present, and future values, with this info, as well as apply a
current balance, with a percentage, to a future payment amount
Lecture #1: 9/9:
● 6 HW problem sets posted on blackboard - they are due at 11:59pm EST
● HW’s are similar to exams
● 3 midterms during semester. They are not cumulative. (No final).
● Grading breakdown is as follows:
○ HW - 20%
○ Class attendance and participation - 5%
○ Midterm #1 - 20%
, ○ Midterm #2 -20%
○ Midterm #3 - 20%
○ Final Case - 15%
● There will be extra credit questions based on what is discussed in class, and mini
cases available for students to improve grades
● Positive cash flow is income
● Negative cash flow is payment
● Positive cash flow, we want to be sooner
● Negative cash flow, we want to be later
Lecture note 3:
● Definition of finance: Finance is the art and science of managing wealth
○ It is pertaining to decisions about what assets to buy/sell, and when to
buy/sell these assets
○ Its main objective is to make individuals, and their businesses better off
● Definition of financial management: Financial management is usually defined as:
those activities that create or preserve the economic value of the assets of an
individual, small business, or corporation
○ Financial management comes down to making sound financial decisions
● The cycle of money: Financial intermediaries assist in the movement of money, from
lenders to borrowers, and back again
○ The main objective of this process is to make all participants better off
● Different areas of finance:
○ Corporate finance: Deals with the financial activities that support the
acquisition, investment, and repayment of capital
○ Investments: Involves the activities centered on the buying and selling of
financial assets, such as stocks and bonds
○ Financial institutions and markets: This handles the organization,
functioning, and activities of financial intermediaries and forums that promote
the cycle of money
○ International finance: Adds the elements of multinational dealings, country
risk, and exchange rate conversion to Corporate finance, Investments, as well
as Financial institutions and markets
● Financial markets, are: Forums where buyers and sellers of financial assets, and
commodities meet
● The finance manager, and Financial Management:
○ Finance Manager:
■ Has to determine the best repayment structure for borrow funds
■ Makes sure the debt obligations are met on time
, ■ Ensures that sufficient funds are available for carrying out daily
operations
○ To sum up the financial managers role: To make investment and financing
decisions that increase the cash flow of the firm, thereby maximizing the
current stock price
● Internal and external players:
○ Financial managers have to interact with various internal and external
stakeholders.
○ Internal stakeholders, include: all department managers and other employees
○ External parties, include: customers, suppliers, government and creditors
- Financial Management, involves 3 main functions:
■ Capital budgeting: is the process of planning, evaluating, selecting,
and managing the long-term operating projects of a company
■ Capital Structure: The means by which a company is financed, and
for public companies is usually a mix of stocks (equity for Co.), and
bonds (debt for Co.), sold to investors and owners
■ Working Capital Management: Managing the day-to-day operating
needs of the company through the current assets, and current liabilities
of the company. This is often referred to as the short term financing
activities of the company
● There are 3 main legal categories of business organizations:
○ Sole Proprietorship
○ Partnership
○ Corporation
● Aside from these 3, some other forms of business organizations include:
○ Hybrid corporations
○ Not-for-profit corporations
Sole Proprietorship advantages:
1. Simplest and easiest form of business
2. Least amount of legal documentation
3. Least regulated
4. Owner keeps all profits
Sole Proprietorship disadvantages:
Monday/Wednesday 8:00-9:15
Lecture #1: 9/9:
Lecture Note 1:
● Time Value of money
What matters when it comes to money?
○ The amount
○ The timing (we prefer to receive money sooner, and pay later. This is what we
call the time value of money)
● Moving cash flows over time
○ Present Value = PV
○ Future Value = FV
● PV x (1 + growth rate)^n = FV (n=# of periods compounded)
● One equation and four variables: Any problem that involves lump sums. For example:
a single outflow and a single inflow
● Applications:
○ Savings for retirement. Your retirement goal is x. The bank offers you a rate of
6%. How much do you need to save, in order to reach y amount, after 40
years?
○ Cost of a loan. Person needs x amount for a college loan. The bank offers it at
5% interest. If this person borrows x amount today, and pays it back over 10
years, how much will they need to pay back?
Lecture Note 2:
● Future Value of multiple payment streams - unequal periodic cash payments, treat
each as a part of a lump sum, and calculate its future value, over relative periods
● Sum up the individual future values, to get the future value of multiple payment
streams
● Examples: $3,000 at 10%, over a 3 year period. This is followed up with payments of
$5,000, $7,000, and $9,000, and the end of each year. Calculate the net amount in the
account, after 3 years.
● You are able to calculate present, and future values, with this info, as well as apply a
current balance, with a percentage, to a future payment amount
Lecture #1: 9/9:
● 6 HW problem sets posted on blackboard - they are due at 11:59pm EST
● HW’s are similar to exams
● 3 midterms during semester. They are not cumulative. (No final).
● Grading breakdown is as follows:
○ HW - 20%
○ Class attendance and participation - 5%
○ Midterm #1 - 20%
, ○ Midterm #2 -20%
○ Midterm #3 - 20%
○ Final Case - 15%
● There will be extra credit questions based on what is discussed in class, and mini
cases available for students to improve grades
● Positive cash flow is income
● Negative cash flow is payment
● Positive cash flow, we want to be sooner
● Negative cash flow, we want to be later
Lecture note 3:
● Definition of finance: Finance is the art and science of managing wealth
○ It is pertaining to decisions about what assets to buy/sell, and when to
buy/sell these assets
○ Its main objective is to make individuals, and their businesses better off
● Definition of financial management: Financial management is usually defined as:
those activities that create or preserve the economic value of the assets of an
individual, small business, or corporation
○ Financial management comes down to making sound financial decisions
● The cycle of money: Financial intermediaries assist in the movement of money, from
lenders to borrowers, and back again
○ The main objective of this process is to make all participants better off
● Different areas of finance:
○ Corporate finance: Deals with the financial activities that support the
acquisition, investment, and repayment of capital
○ Investments: Involves the activities centered on the buying and selling of
financial assets, such as stocks and bonds
○ Financial institutions and markets: This handles the organization,
functioning, and activities of financial intermediaries and forums that promote
the cycle of money
○ International finance: Adds the elements of multinational dealings, country
risk, and exchange rate conversion to Corporate finance, Investments, as well
as Financial institutions and markets
● Financial markets, are: Forums where buyers and sellers of financial assets, and
commodities meet
● The finance manager, and Financial Management:
○ Finance Manager:
■ Has to determine the best repayment structure for borrow funds
■ Makes sure the debt obligations are met on time
, ■ Ensures that sufficient funds are available for carrying out daily
operations
○ To sum up the financial managers role: To make investment and financing
decisions that increase the cash flow of the firm, thereby maximizing the
current stock price
● Internal and external players:
○ Financial managers have to interact with various internal and external
stakeholders.
○ Internal stakeholders, include: all department managers and other employees
○ External parties, include: customers, suppliers, government and creditors
- Financial Management, involves 3 main functions:
■ Capital budgeting: is the process of planning, evaluating, selecting,
and managing the long-term operating projects of a company
■ Capital Structure: The means by which a company is financed, and
for public companies is usually a mix of stocks (equity for Co.), and
bonds (debt for Co.), sold to investors and owners
■ Working Capital Management: Managing the day-to-day operating
needs of the company through the current assets, and current liabilities
of the company. This is often referred to as the short term financing
activities of the company
● There are 3 main legal categories of business organizations:
○ Sole Proprietorship
○ Partnership
○ Corporation
● Aside from these 3, some other forms of business organizations include:
○ Hybrid corporations
○ Not-for-profit corporations
Sole Proprietorship advantages:
1. Simplest and easiest form of business
2. Least amount of legal documentation
3. Least regulated
4. Owner keeps all profits
Sole Proprietorship disadvantages:
