corporate financial management welcome to1934

8/3/2019 Corporate Financial Management Welcome To1934

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Corporate Financial Management

WELCOME TO

FINANCE 254


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The First Day Agenda

Course Administrative Overview

Top 10 List

What is corporate finance

The goal of the firm

10 Principles of Financial Management

Things you should know from Chapter 1


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Required Class Materials

Textbook: Financial Management, Principlesand Applications, 9th Edition by Keown, Scott,Petty, and Scott.

Finance 254 Syllabus Book by yours truly incampus bookstores.

Texas Instruments BAII Plus financial

calculator


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Important Internet Addresses

Course Website:http://www.cba.uiuc.edu/~mdyer/fin254.htm

Syllabus and Lecture Notes

Assignments Posted Here Textbook Website:

http://myphlip1.pearsoncmg.com/student Select Financial Management 9th edition by

Keown
http://../fin254.htmhttp://prenhall.com/keownhttp://prenhall.com/keownhttp://../fin254.htm


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Contacting Prof. Dyer

Office: 328J DKH

Telephone: 244-7807

Office Hours:2-4 Monday & Wednesday

1-3 Thursday

e-mail: [email protected]


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TOP

10

LIST


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What is Corporate Finance?The Balance Sheet


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Chapter 1 Things To

Know

What is finance?

The goal of the firm Advantages and disadvantages of different

business organizations (in discussion)Sole proprietorship and partnerships

Corporations How corporations raise money

10 Principles of Financial Management


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What is Corporate Finance?

In the simplest sense: involves whatassets a company should invest in andhow to raise cash to finance theseinvestments in order to maintain andmaximize economic value.

Where does a company get cash to runand finance its business?


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Goal of the Firm

The primary goal is shareholder wealthmaximization.

This means:Maximizing Firm Value (market price per

share of common stock x number ofoutstanding shares)

Maximizing stock price.


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What Determines ShareholderValue?

Managerial decisions affecting: Expected cash flows.

Timing of cash flows.

Riskiness of cash flows. In other words, stock price = risk-adjusted

present value of future expected cash flows.

Financial managerial decisions include capital

structure, dividend policy, working capitalmanagement, and investment strategies.


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Why not Profit Maximization?

Ignores timing of cash flows.

Ignores risk (or uncertainty) of cash

flows.


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The Corporation andFinancial Markets

cashInvestors

Secondary

markets

Government

securities

Cash flow

reinvest

tax

Corporation

dividends,

etc.


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Primary MarketMarket in which new issues of a

security are sold to initialbuyers.

Secondary Market

Market in which previouslyissued securities are traded.



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Initial Public Offering (IPO)The first time the firms stock is

sold to the general public.Seasoned New IssueA new stock offering by a firm

that already has stock that istraded in the secondary market.


Fi i l M t


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Financial ManagementPrinciples or Axioms

1) Risk - return trade-off

2) Time value of money

3) Cash - not profits - is king

4) Incremental cash flows count

5) The curse of competitive markets

6) Efficient capital markets

7) The agency problem

8) Taxes bias business decisions

9) All risk is not equal

10) Ethical dilemmas are everywhere in

finance


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Key Financial DecisionMaking Rule

Finance is concerned with raising cash toinvest in assets that are expected to generatefuture cash flows

Net Present Value (NPV) = present value offuture expected cash flows - initial outlay.

A firm that follows the practice of investing inpositive NPV assets will increase shareholder

wealth & firm value. This idea ties together most of the 10

Principles or Axioms together neatly.


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The Nitty Gritty

Grade Breakdown

420 points from 3 exams: 140 points each(with optional final)

31 multiple choice questions: 15 questions worth 4points each, 16 problems worth 5 points each.

Formula sheets will be given at the end of eachexam.

100 points from 4 homework sets posted on Website on Assignments Page

1st assignment posted next week.

A few extra credit pop quizzes in discussion


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Exam Dates

#1, Monday, Oct. 7 (Chapters 1, 14, 5, 6 & 7) 7-9 pm, Conflict 3-5 pm

#2, Monday, Nov. 4 (Chapters 2, 3,4 & 8) 7-9 pm, Conflict 3-5 pm

#3, Monday, Dec. 9 (Chapters 9, 10, 12 & 21) 7-9 pm, Conflict 3-5 pm

Optional final exam dates:Wednesday, Dec. 18: 9-11 amSaturday, Dec. 21: 1:30-3:30 pm


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Assignment Due Dates

All are due in yourTAs mailbox in 340

Wohlers Hall by 4 PMon the below dates

and must be typed. Can be done in groups

of four if all groupmembers have thesame TA.

Name(s) and discussionsection(s) must betyped on 1st page withNO cover page.

Sept. 20 Homework 1Due (25 points)

Sept. 27 Homework 2Due (20 points)

Oct. 25 Homework 3Due (25 points)

Nov. 22 Homework 4Due (30 points)

Late assignments areaccepted with 50%penalty through thefollowing Wednesday.


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Miscellaneous Items

Textbook problems assigned in syllabus willnot be graded, but you are responsible forknowing how to do them.

Solutions to all assigned textbook problemsare in the back of syllabus.

Lecture Note Powerpoint files will be postedon the Fin 254 Website

Helpful textbook items: online study guide

and questions at MyPhlip website. Register athttp://myphlip1.pearsoncmg.com/

corporate financial management welcome to1934

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