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    Lecture 1 (BF)

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    Hussnain Abbas
    This document provides an introduction to a business finance course. It outlines the course topics which will cover the basics of finance in businesses, including how businesses manage their money, finances, and maximize returns. The course will cover topics like the financial environment, time value of money, valuation of securities, risk and returns, financial statement analysis, and capital budgeting techniques. It also discusses the role of financial management in attaining and managing assets to maximize shareholder wealth.

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    Lecture 1 (BF)

    Uploaded by

    Hussnain Abbas
    23 views20 pages
    This document provides an introduction to a business finance course. It outlines the course topics which will cover the basics of finance in businesses, including how businesses manage their money, finances, and maximize returns. The course will cover topics like the financial environment, time value of money, valuation of securities, risk and returns, financial statement analysis, and capital budgeting techniques. It also discusses the role of financial management in attaining and managing assets to maximize shareholder wealth.

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    This document provides an introduction to a business finance course. It outlines the course topics which will cover the basics of finance in businesses, including how businesses manage their money, finances, and maximize returns. The course will cover topics like the financial environment, time value of money, valuation of securities, risk and returns, financial statement analysis, and capital budgeting techniques. It also discusses the role of financial management in attaining and managing assets to maximize shareholder wealth.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    23 views20 pages

    Lecture 1 (BF)

    Uploaded by

    Hussnain Abbas
    This document provides an introduction to a business finance course. It outlines the course topics which will cover the basics of finance in businesses, including how businesses manage their money, finances, and maximize returns. The course will cover topics like the financial environment, time value of money, valuation of securities, risk and returns, financial statement analysis, and capital budgeting techniques. It also discusses the role of financial management in attaining and managing assets to maximize shareholder wealth.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 20

    Business Finance

    (MGT 232)

    Lecture 1
    Introduction
    Introduction to the Course

    • What we are going to study:


    “ the BASICs of FINANCE in BUSINESSES”

    -How they outsource their money


    -How they manage their finances
    -The best utilization of their money
    -The return earned through its efficient management
    Course Outline
    • BUSINESS FINANCE INTRODUCTION
    • THE FINANCIAL ENVIRONMENT
    • TIME VALUE OF MONEY
    • VALUATION OF SECURITIES (Bonds and shares)
    • RISK AND RATES OF RETURN
    • FINANCIAL STATEMENT ANALYSIS
    • COST OF CAPITAL
    • CAPITAL BUDGETING TECHNIQUES
    • WORKING CAPITAL CONCEPTS,
    • DIVIDEND POLICY
    • CAPITAL MARKETS
    • LONG TERM SECUITIES
    • FINANCE USING EXCEL SPREADSHEET
    Suggested Readings

    1. Fundamental of Financial Management, seventh


    Edition by Eugene F. Brigham
    2. Fundamental of Financial Management by Van Horne
    3. Fundamental of Corporate Finance by Brealy and
    Myers
    4. Corporate Finance By Ross Westerfield Jordan
     
     
     
    Course requirements
    • 4 x Assignments
    • 4 x Quizzes
    • 4 x Discussion Topics
    • 2 Sessional Exams
    • 1 Final Exam
    Business
    Business Finance
    Finance
    Introduction
    Introduction
    What is Finance?
    • Managing the large amount of Money
    (Dictionary Definition)

    Finance is:
    “attaining the amount of money, using it by
    investing and gaining return on your
    investment”
    Finance (Interrelated areas)
    The Role of
    Financial Management
    • What is Financial Management?
    • The Goal of the Firm
    • Organization of the Financial
    Management Function
    What is Financial
    Management?

    Concerns the acquisition,


    financing and management of
    assets with some overall goal
    in mind.
    Investment Decisions
    Most important of the three decisions.

    • What is the optimal firm size?


    • What specific assets should be acquired?
    • What assets (if any) should be reduced or
    eliminated?
    Financing Decisions
    Determine how the assets (LHS of balance
    sheet) will be financed (RHS of balance
    sheet).
    • What is the best type of financing?
    • What is the best financing mix?
    • What is the best dividend policy?
    • How will the funds be physically acquired?
    Asset Management
    Decisions
    • How do we manage existing assets efficiently?
    • Financial Manager has varying degrees of
    operating responsibility over assets.
    • Greater emphasis on current asset management
    than fixed asset management.
    What is the Goal
    of the Firm?

    Maximization of
    Shareholder Wealth!
    Value creation occurs when we
    maximize the share price for current
    shareholders.
    Shortcomings of
    Alternative Perspectives
    Profit Maximization
     Maximizing a firm’s earnings after taxes.
    Problems
    • Could increase current profits while harming firm
    (e.g., defer maintenance, issue common stock to
    buy T-bills, etc.).
    • Ignores changes in the risk level of the firm.
    Shortcomings of
    Alternative Perspectives
    Earnings per Share Maximization
     Maximizing earnings after taxes divided by
    shares outstanding.
    Problems
    • Does not specify timing or duration of expected
    returns.
    • Ignores changes in the risk level of the firm.
    • Calls for a zero payout dividend policy.
    Strengths of Shareholder
    Wealth Maximization
    • Takes account of: current and future profits and
    EPS;
    EPS the timing, duration, and risk of profits and
    EPS;
    EPS dividend policy;
    policy and all other relevant
    factors.
    • Thus, share price serves as a barometer for
    business performance.
    The Modern Corporation

    Modern Corporation

    Shareholders Management

    There exists a SEPARATION between


    owners and managers.
    Summary
    • What is Finance? And interrelated areas
    • Financial Management
    • Three Important FM decisions
    • Goal of a Firm (some alternatives)
    • Structure of a Modern Corporation

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