Samenvatting Fundamentals of Corporate Finance ISE - Banking & Finance

Marie Jacobs IBM_01_06


BANKING AND FINANCE
2023-2024
Marie Jacobs


Table of contents

1. CORPORATIONS

1.1 Goals and governance of corporation
1.1.1 Investment and financing decisions
1.1.2 What is a corporation?
1.1.3 Who is the financial manager?
1.1.4 Goals of the corporation
1.1.5 Agency problems, executive compensation, corporate
governance
1.1.6 The ethics of maximizing values
1.1.7 Careers in financing
1.1.8 Preview of coming attractions READ
1.1.9 Snippets of financial history

2. FINANCIAL MARKETS

2.1 Financial markets and institutions
2.1.1 The importance of financial markets and institutions
2.1.2 The flow of savings to corporations
2.1.3 Functions of financial markets and intermediaries
2.1.4 The crisis of 2007-2009

3. ACCOUNTING AND FINANCE

3.1 Accounting and finance
3.1.1 The Balance Sheet
3.1.2 The Income Statement
3.1.3 The Cash Flow Statement
3.1.4 The Financial Statements – highlights
3.1.5 Case study: Forecasting Free Cash Flows

4. THE TIME VALUE OF MONEY

4.1 Future values and compound interest
4.2 Present values
4.3 Multiple cash flows
4.4 Reducing the chore of calculations: part 1
4.5 Level cash flows: perpetuities and annuities
4.6 Reducing the chore of calculations: part 2
4.7 Effective annual interest rates

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,Marie Jacobs IBM_01_06

4.8 Inflation and the time value of money

5. VALUING BONDS

5.1 Bond pricing
5.2 Interest rates and bond prices
5.3 Yield to maturity
5.4 Bond rates of returns
5.5 The yield curve
5.6 Corporate bonds and the risk of default

6. VALUING STOCK

6.1 Stocks and the stock market
6.2 Market values, book values and liquidation values
6.3 Valuing common stocks
6.4 Simplified dividend discount model
6.5 Discounted cash flow model
6.6 No free lunches on Wall Street
6.7 Market anomalies and behavioral finance

7. CORPORATE FINANCE

7.1 Creating value with financing decisions
7.2 Patterns of corporate financing
7.3 Common stock
7.4 Preferred stock
7.5 Corporate debt
7.6 Convertible securities

8. VENTURE CAPITAL AND IPO’S

8.1 Venture capital (VC)
8.2 The initial public offering (IPO)
8.3 General cash offers by public companies
8.4 The private placement

9. INTERNATIONAL FINANCIAL MANAGEMENT

9.1 Foreign exchange markets
9.2 Hedging currency risk




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,Marie Jacobs IBM_01_06




CORPORATIONS

1. Investment and financing decisions

Investment decisions
- Capital budgeting decisions => SPEND money
- Capital expenditure (CAPEX)
- Tangible or intangible

- Real assets = assets used to produce goods and services

- Long-term consequences or short-term pay off

- Success story or complete disaster


‘Effective management of capital expenditures is crucial for survival and
growth and requires striking the right balance between the need for
resources in the future and the ability to generate profits in the present’


Financing decisions
- Sources and amount of financing => RAISE money
- Issuance of financial assets to finance investment in real assets

- Capital structure decisions : DEBT financing vs EQUITY financing

- Stocks, loans, bonds…


‘Financing decisions may not necessarily add as much value compared to
good investment decisions, BUT they can destroy value if they are stupid
or ambushed by bad news. Also, the most successful companies
sometimes have the simplest financing strategies’


2. What is a corporation?

Corporation:

 Distinct legal entity
 Articles of incorporation
 Owned by shareholders
 Indirect ownership of financial assets

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 Limited liability, no recourse
 Permanent
 Resident of the country
 No voting power

No Corporation:

 N/A
 Direct ownership of real assets
 Personal liability, recourse
 Finite
 Resident of the country
 Voting power




Separation of ownership and control  ensures permanence BUT can
create conflict of interest




3. Who is the financial manager

- Chief Financial Officer (CFO)
 Financial policy
 Corporate planning

- Treasurer > money

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