introduction to financial management
DESCRIPTION
Introduction to Financial Management. Administrative Issues and Course Overview. Today’s plan. administrative issues syllabus prerequisite add, drop and withdraw Mid-term exams In-class work final grade course overview basic probability concepts. The instructor. My name is George Li - PowerPoint PPT PresentationTRANSCRIPT
Financial management: Lecture 1
Introduction to Financial Management
Administrative Issues and Course Overview
Financial management: Lecture 1
Today’s plan
administrative issues• syllabus
• prerequisite
• add, drop and withdraw
• Mid-term exams
• In-class work
• final grade
course overview basic probability concepts
Financial management: Lecture 1
The instructor My name is George Li Office: DTC 582 Website: http://online.sfsu.edu/~li123456 Email: [email protected] Office hours:
• Monday 11:30 a.m. – 1:30 p.m. • Thursday 4:15 p.m. - 6:15 p.m.
Research interest:• Corporate finance: real options, technological innovations, and
valuations
• Asset pricing: information and stock prices
Financial management: Lecture 1
Textbook
fundamentals of corporate finance, by Brealey, Myers and Marcas (6th edition) sorry about the cost this is a pretty popular textbook used in many
major schools for the first course in corporate finance
Financial management: Lecture 1
Prerequisite
You are required to finish Bus 780, Ds 510 and Ds 512.
It is the school’s policy that all the students in this course must satisfy this requirement and there is no exception
Financial management: Lecture 1
Add, drop and withdrawal policy
The business school has the policy for add, drop and withdrawal• In the first four weeks, you have to get enrolled in the
class, if you want.
• Students can withdraw once
• Please read the bulletin for detail information Please refer to this semester bulletin for
detailed information.
Financial management: Lecture 1
Pass or no pass grade
BUS 785 is a letter graded course. Please don’t change to pass or no-pass
course unless you have talked to me to get my permission; otherwise you will get a no-pass grade, if you change it without permission.
Financial management: Lecture 1
Homework
To help you understand the concepts taught in class, and prepare for the two mid-term exams and the final exam, there is a weekly homework set, which is not graded, but its solution will be posted in my website.
Financial management: Lecture 1
Two mid-term exams
There are two mid-term exams, which are in the form of multiple choice questions and take about 120 minutes.
There are no makeup or in-advance mid-term exams.
The mid-term with a higher score will have a weight of 0.8; the lower mid-term will have a weight of 0.2.
Financial management: Lecture 1
Case discussion
There are three in-class case discussion. The three cases are from the textbook. They are from chapters 5, 7 and 13.
Financial management: Lecture 1
The final exam The final exam will be in class (closed book), with the
form of multiple choice questions. There are no makeup or in-advance final exams. The final exam is cumulative, based on the two mid-
term exams, homework and in-class case discussion.
The final has the same time and classroom as regular lectures
Financial management: Lecture 1
Final grade
Your overall course grade will be based on your performance in the class, the mid-term exams, and the final exam.
Class attendance: 5 pts Two mid-term exams: 45
pts Final exam: 50 pts Total 100 pts
Financial management: Lecture 1
Grading policy
Your grades are based on the distribution of the scores of the class. Specifically, your final grade is based on the following table.
Ranking Grade 0%-10% A range
10%-50% B range 50%-85% C range 85%-95% D range
95%-100% F
Financial management: Lecture 1
Why do you want to take this course
Why are you taking BUS 785?• nothing better to do today ?
• become a millionaire overnight?
• the instructor is a nice guy for a good grade?
• get a “stamp of approval” to get a job ?
• learn finance for fun ?
• simply a required course ?
• learn finance to be more successful?
Financial management: Lecture 1
My objective in this course
I want everyone in the room to learn finance very well this semester• i want you to understand the concepts / issues
• i want you to feel comfortable talking about finance and answering finance questions.
• i want you to gain a set of tools that will help you look at the world in a slightly different way.
What is standing in the way of those objectives?• Over-confidence
• Under-confidence
Financial management: Lecture 1
Two ways of learning
Positive • Can be a fun, since it is an opportunity to improve your
future career, open your mind and broaden your vision
• Look at each difficult question as an opportunity to learn new things
• Good performance Negative
• Can be boring, since it is regarded as a burden, a task
• Look at each difficulty as a “torture” or pain
• Bad performance
Financial management: Lecture 1
My approach of teaching BUS 785
Focus on several fundamental, important concepts,
Applications and economic intuitions Avoid too many materials Help understand finance better.
Financial management: Lecture 1
Academic integrity The instructor has zero tolerance for cheating in all
exams. During the exams, please don’t look over each other. During the exams, computers, cell phones, books and
previous exams are absolutely not allowed During each exam, pencils, one cheat sheet (8.5*11) on
both sides, a calculator (financial or non-financial) are permitted.
During each exam, you can use the exam as the scratchy paper.
In each exam, you have to use scantrons to put your solution.
Financial management: Lecture 1
Corporate finance: what is it?
A set of concepts, theories and approaches that help the firm make financial decisions
Financial management: Lecture 1
Financial decisions
Capital budgeting (use of the capital)• Real investments
• Mergers; acquisitions
Financing (capital structure decision)• Equity
• Debt
Risk management• Diversification
• hedging
Financial management: Lecture 1
BUS 785: course organization
BUS 785
Module 1Fundamentals of valuation
Module 2Valuing risky investments
Risk and return
Module 3 Corporate financial decisions
Module 4 Market efficiency and options
Fundamentals of PVFinancial decision
Interest rates
Perpetuities and annuities calculation
Valuing stocks and bonds
NPV and other criteria
Portfolio theoryDiversification and covariance
Modigliani-Miller theorem 1Pizza size is independent of
how sliced
Tangency portfolio, CAPMrisk and return
Effect of leverageWACC and discount rate
Binomial model, replicationRisk-neutral probabilities
Options and Black-Scholes
Weak, semi-strong and strong form efficiency
Information and stock prices
Types of securitiesStocks, bonds and other
Modigliani-Miller theorem 2WACC
Financial management: Lecture 1
Course organization (2)
This course is broken-down into four modules
Module 1: time value of money Module 2: risk and return Module 3: capital structure Module 4: financial markets
Financial management: Lecture 1
Time value of money
This module is a “skill building” block in this course
We will soon have the necessary skills needed to value stocks and bonds
In this module, we don’t explicitly consider risk• Cash flows forecasts are given
• The discount rate is given
Financial management: Lecture 1
Risk and return
This part teaches us about uncertainty How do we measure risk? How much is a risky cash flow in the
future worth (today)? There are both:
• skill building sections
• conceptually more difficult sections
Financial management: Lecture 1
Financing decisions
If you are the CEO of an industrial company• you can make your company more valuable
by choosing “better” projects
• we want to know if you (and the CFO) can make your company more valuable by changing the mixture of your financing (i.e. the ratio of debt to equity)