Académique Documents
Professionnel Documents
Culture Documents
Course Syllabus
Hour Ry
University of South East Asia
McGrawHill/Irwin
Copyright2013byTheMcGrawHillCompanies,Inc.Allrightsreserved.
Course Objective
bnab;BInisSiteronmuxviCarUbiyvt
nigFnaKarenHcb;sBVRKb;
nisiStGacyl;dwgdUcxageRkam
yl;dwgBIlkNTUeTAnrUbiyvt
yl;dwgBITIpSarhirBavt
yl;dwgBIeKalneya)ayrUbiyvtrbs;rd
aPi)al
yl;dwgBIeKalneya)ayrUbivt nig
FnaKarBaNiC
yl;dwgBIkarRKb;RKgnRbBnFnaKar2
Hour Ry
of South East Asia
University
Course Description
Hour Ry
University of South East Asia
McGrawHill/Irwin
Copyright2013byTheMcGrawHillCompanies,Inc.Allrightsreserved.
em1
ero
RbvtirUbiyvt
nTI
CHAPTER
enAGnrCati
nigkm<Ca
>RbvtirUbiyvtenAelIBiPBelak
rUbiyvtenARbeTsRkik
rUbiyvtenARbeTsGg;eK
s
rUbiyvtenARbeTsGaemr
ic
>RbvtirUbiyvtenAkm
<Ca
II
em2
ero
rUbiyvt
nig
nTI
CHAPTER
GtiprNa
Charter 2
6
1>RbvtikekItrbs;rUb
iyvt (The History of
Money )
2>GtiprNa
(Inflation)
Hour Ry
of South East Asia
University
emeronTI3
sBaaNTUeTA nig
esvarbs;FnaKar
1-FnaKarCaGVI?
2 muxgarrbs;FnaKar
3>esvakmrbs;FnaKar
(Bank Services )
Charter 3
em4
ero
nTI
CHAPTER
Charter 4
em5
ero
karRKb;RKgFn
nTI
CHAPTER
aKar
Charter 5
10
em6
ero
FnaKarBaNiC nig
nTI
eKalneya)ayrUbiyvt
CHAPTER
11
INTRODUCTION TO SUBJECT
Suppose you intend to start a business.
Three up-front questions that hit you
think are:
- What type of investments(asset) do we need?
- Where the money will come from?
- How we will finance our day to day
monetary matters (like purchase of raw
materials and payment of salaries etc)?
Hour Ry
of South East Asia
University
Current Assets
Long-Term
Debt
Fixed Assets
1 Tangible
Shareholders
Equity
2 Intangible
Hour Ry
of South East Asia
University
Current Assets
Long-Term
Debt
Fixed Assets
1 Tangible
2 Intangible
Hour Ry
of South East Asia
What type of
asset do we
need?
University
Shareholders
Equity
6
Current Assets
Fixed Assets
1 Tangible
2 Intangible
Hour Ry
of South East Asia
University
Long-Term
Debt
Shareholders
Equity
7
Current Assets
Net
Working
Capital
Fixed Assets
1 Tangible
2 Intangible
How much
short-term cash
flow does a
company need
to pay its bills?
Hour Ry
of South East Asia
University
Long-Term
Debt
Shareholders
Equity
8
Hour Ry
of South East Asia
University
1- Capital budgeting
Capital budgeting is the planning and
control of cash outflows in the
expectation of receiving future cash
inflows from investments in non-current
assets.
Involves evaluating the:
size of future cash flows
timing of future cash flows
risk of future cash flows.
Hour Ry
of South East Asia
University
10
2.Capital Structure
Should we use debt or equity?
The value of the firm can be
thought of as a pie.
70%50%30%
25%
DebtDebt
Equity
50%
75%
Equity
If how you slice the pie affects the size of the pie, then
the capital structure decision matters.
Hour Ry
of South East Asia
University
11
3- Working Capital
Management
How much cash and inventory should
be kept on hand?
Should we extend credit terms for
customers? If so, what are the
conditions?
How is short-term financing acquired?
Hour Ry
of South East Asia
University
12
Corporation
Hour Ry
of South East Asia
University
13
Sole Proprietorship
Advantages
Easiest to start
Least regulated
Single owner keeps
all the profits
Taxed once as
personal income
Hour Ry
South East Asia
Disadvantages
Limited to life of
owner
Equity capital
limited to owners
personal wealth
Unlimited liability
Difficult to sell
ownership interest
University of
14
Partnership
Advantages
Two or more
owners
More capital
available
Relatively easy to
start
Income taxed once
as personal income
Hour Ry
South East Asia
Disadvantages
Unlimited liability
General partnership
Limited partnership
Partnership
dissolves when one
partner dies or
wishes to sell
Difficult to transfer
ownership
University of
15
Corporation
Advantages
Limited liability
Unlimited life
Separation of
ownership and
management
Transfer of
ownership is easy
Easier to raise
capital
Hour Ry
South East Asia
Disadvantages
Separation of
ownership and
management
Double taxation
(income taxed at
the corporate rate
and then dividends
taxed at the
personal rate)
University of
16
Hour Ry
of South East Asia
University
17
Organization Chart
Board of Directors
Chairman of the Board and
Chief Executive Officer (CEO)
President and Chief
Operating Officer (COO)
Vice President Finance
Treasurer
Controller
Cash Manager
Tax Manager
Data Processing
Hour Ry
of South East Asia
University
18
Agency problem
Conflict of interest between principal and
agent
University
19
Financial
markets
Retained
cash flows (D)
Short-term debt
Cash flow
from firm (C)
Dividends and
debt payments (F)
Government
Hour Ry
of South East Asia
Long-term debt
Equity shares
Taxes (E)
Current assets
Fixed assets
University
Secondary Markets
21
University
Financial Markets
Firms
Stocks and
Bonds
Money
Investors
securities
Bob
Sue
money
Primary Market
Secondary Market
Hour Ry
of South East Asia
University
22
Quick Quiz
What are the three types of financial
management decisions and what questions
are they designed to answer?
What are the three major forms of business
organization?
What are agency problems and why do they
exist within a corporation?
What is the difference between a primary
market and a secondary market?
Hour Ry
of South East Asia
University
23
Review
The time value of money
Hour Ry
of South East Asia
University
23
Hour Ry
of South East Asia
University
23
FV PV 1 rt
Hour Ry
of South East Asia
University
23
2- Present Value
PV
Hour Ry
of South East Asia
FV
1 r
University
Hour Ry
University of South East Asia
36
4
$8,000
FV
?
Hour Ry
University of South East Asia
37
Hour Ry
of South East Asia
University
8,000.00
PV1
4 , 000
(1.08 )1
3,703.70
PV2
4 , 000
(1.08 ) 2
3,429.36
Total PV
$15,133.06
Hour Ry
University of South East Asia
PV
C1
(1 r )
(1 r ) 2 ....
C2
Hour Ry
University of South East Asia
Hour Ry
University of South East Asia
PV
C
r
C = cash payment
r = interest rate
Hour Ry
University of South East Asia
PV
100 , 000
.10
$1,000,000
Hour Ry
University of South East Asia
PV
1, 000 , 000
(1 .10 ) 3
$751,315
Hour Ry
University of South East Asia
Hour Ry
University of South East Asia
4-3 FV annuity
You plan to save $3,000 every
year for 4 years. Given a 10%
rate of interest, what will be the
FV of this amount?
Hour Ry
of South East Asia
University
5- Inflation
Inflation - Rate at which prices as a whole
are increasing.
Hour Ry
of South East Asia
University
Inflation
Example
If the interest rate on one year govt. bonds is
5.0% and the inflation rate is 2.2%, what is the
real interest rate?
Hour Ry
University of South East Asia
50
Hour Ry
University of South East Asia
End of Chapter
Hour Ry
of South East Asia
University
24