Finance Foundations

Introduction

• The essence of finance
• What you should know

1. What Is Finance?

• The board of directors discuss finance
• Finance inside of companies
• Finance outside of companies

2. Understanding Financial Statements

• Introducing financial statements
• Overview of financial statements
• The balance sheet
• The income statement
• The statement of cash flows
• Common ratios: Debt and current ratios
• Common ratios: Return on sales, asset turnover, and ROE
• Common ratios: Price-earnings ratio
• Forecasting financial statements

3. Short-Term Financial Management

• Short-term financial management
• The operating cycle
• Cash management
• Managing receivables and inventory
• Obtaining short-term financing
• Understanding internal controls

4. Risk and Return

• Introducing risk and return
• What is risk?
• Why we don’t like risk
• Reducing risk through diversification
• Beta: The concept
• Beta: Examples
• Risk-free rate
• Equity risk premium
• Capital asset pricing model (CAPM)

5. Obtaining Long-Term Financing

• Introducing long-term financing
• Does capital structure matter?
• Factors influencing optimal capital structure
• Cost of capital: All debt or all equity financing
• Cost of capital: Split debt-equity financing
• Weighted-average cost of capital

6. Understanding Securities Markets

• Introducing securities markets
• The difference between a stock and a bond
• Stock markets
• Bond markets
• Publicly traded shares: What impacts the share price?
• Initial public offering (IPO): Microsoft
• Can you pick stocks in the stock market?

7. Financial Institutions

• Introducing financial institutions
• Traditional banks
• Investment banks
• Investment funds: Index funds
• Investment funds: Managed funds, private equity funds, and hedge funds
• Insurance companies

8. Capital Budgeting

• Introducing capital budgeting
• Capital budgeting overview
• The time value of money
• Example: Buying a car in Hong Kong

9. Personal Financial Planning

• Introducing personal financial planning
• The secret to financial security
• The importance of personal budgeting
• Simple savings and investment plans

Conclusion

• Reviewing corporate finance