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FI 3300 _ Corporate Finance _ Online Lecture AUG 30

by: Mariah Law

FI 3300 _ Corporate Finance _ Online Lecture AUG 30 FI 3300

Marketplace > Georgia State University > FI 3300 > FI 3300 _ Corporate Finance _ Online Lecture AUG 30
Mariah Law

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Hey class, These notes are the ones I took with the only lecture on August 30, our first online lecture. He has posted most of this information online. I have also highlighted the formulas
Corporation Finance
Class Notes
finance, Corporate Finance, GSU, GSU3300
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This 8 page Class Notes was uploaded by Mariah Law on Friday September 2, 2016. The Class Notes belongs to FI 3300 at Georgia State University taught by Fendler in Fall 2016. Since its upload, it has received 93 views.


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Date Created: 09/02/16
[FI3300- Corporate Finance- Online Lecture Aug 30] Introduction and Chp 1 & 2 Overview *Reminder : make sure to take weekly quizzes, Take home problem sets and continue readings Agenda : -how chat sessions work Pre-session quizzes -questions about course -into to finance -review of financial statements  The income statement  The balance sheet CHAT SESSIONS  Some sessions will be on collaborate (mainly)  Occasionally, class will be in the iCollege "typing" chat room  Will go over solutions to problems in the chats *reminder* : only email with GSU email account, not through iCollege Use subject : FI 3300 Online Student THPS1 -print these out and complete them -there will be a submission form (open next Tues. After chat) -due Sept. 8 (12:00 pm) -accounting review -simple math ( +,-,*, /) INTRODUCTION TO FINANCE divided into sub-subject areas: -corporate financial management -investments -financial markets & institutions All areas are inter-connected: The firm<-> Financial Markets <-> Investors <-> Financial Institutions Financial Management *where we will focus -Manage the company's short-term assets and liabilities  Manage cash, accounts receivable and inventory  Manage short term loans (notes payable), accounts payable and accruals 2 -determine what long-term investments should be undertaken?  Buildings  Machinery  Equipment  R & D -determining where to get the long-term financing needed?  Debt (borrow money from bank and/or issue bonds)  Equity (sell stock and/or retain earnings) Goal of Financial Management  For publicly traded corporations, shareholders own the firm  Shareholders desire one thing: o Increased wealth  Must manage finances of the firm in a way that maximizes shareholder wealth  How? o We will find out later in the semester Market Values  Market value of debt = number of bonds outstanding times price per bond  Debt value is largely outside control of financial manager  Market value of equity = number of shares outstanding times price per share  Goal is to maximize market value of equity (i.e., shareholder wealth) 3  Maximize market value of assets (if A increases with D constant, then E increases = increased shareholder wealth) *Market value = debt of any asset in the PRESENT VALUE of all expected future cash flows  Assume you expect to receive $100,000 exactly 5 years from today o Worth today is the present value o Function of amount, time and risk Balance sheet view of firm ______________________ Assets | Debt Equity Unlike accounting, in finance all value are MARKET values (not book values) Like accounting, market value balance sheets must balance (A=D+E) 4 How increase the market value?  Manage assets so as to maximize the future cash flow, generate expected amounts sooner rather than later and minimize the riskiness of the cash flows  What could GM do to increase the market value of its assets (and therefore increase shareholder equity)? *Make all of the assets better *Invest to increase future cash flow *Increase value : Spend money to make money FINANCIAL STATEMENT RELATIONSHIPS Income Statement Revenue COGS Gross profit Operating Exp Depreciation Operating profit Interest Earnings before taxes Taxes Net Income 5 *We assume that all income statements are from retail businesses Income Statement Equations Gross revenue – allowances = net revenue -allowances can be established for: -bad debt -returns -net revenue is the top figure that most companies report on their income statement (net revenue = sales) COGS = number of units sold * cost per unit FIFO, LIFO or average cost COGS = beginning inventory + purchases – ending inventory Depreciation expense on income statement -> change in accumulated depreciation from the balance sheet 2012 2013 2014 Ex: gross fixed assets $100,000 150,000 180,000 (accumulated depreciation) (20,000) (28,000) (31,000) Net fixed assets 80,000 122,000 149,000 6 Depreciation expense on IS 8,000 3,000 Interest expense : interest rate x amount of debt outstanding Taxes = tax rate x earnings before taxes (EBT) Change in RE (retained earnings) = net income - dividends Retained Earnings : money that has been reinvested back into the firm over the firm's entire history Additional paid in capital : amount of money that was raised when the stock was sold OVER AND ABOVE par value per share A = D + E Net accounts receivable = gross accounts receivable - allowances Ending Inventory (on the balance sheet) = beginning inventory + purchase – COGS Net fixed assets = gross fixed assets – accumulated depreciation Change in accumulated depreciation (from one accounting period to the next) is the depreciation on the income statement for the latter accounting period. Total long-term debt = current portion of long-term debt + long term debt 7  Current portion – will be paid off this accounting period  Long-term debt – will be paid off in the future Current liabilities = notes payable + accounts payable + accruals + current portion of long-term debt * notice that says the current portion Change in RE = net income – dividends paid 8


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