Introduction to finance & ethics in finance
17/07/2013
Finance
Semester 2, 2013
Seminar 1
Introduction to finance & ethics in finance
Ross et al. chapter 1.
These powerpoint slides have been adapted from Frank Finn
Professor of Finance Tom Smith’s (UQ) teaching material of
“Three key finance ideas of valuation” and Dr. Scott McCarthy’s teaching material.
1
What is Finance?
• Every business is a process of acquiring and disposing assets: real assets and financial assets. • Finance is a science of valuation and management of assets.
• The field of finance deals with the concepts of time, money, risk and how they are interrelated. 1
17/07/2013
Two Key Valuation Ideas
The Time Value of Money
In studying the time value of money, we will see it forms the basis for all asset valuations. In this course, we will study the following aspects of the time value of money:
Time Value of Money
Financial
Mathematics
Valuing
Stocks
Valuing
Bonds
Making
Investment
Decisions
Two Key Valuation Ideas
Diversification
‐ Financial market participants want to make as much money as possible with the least risk. To reduce risk, market participants can diversify. If everyone diversifies, this tells us something about how assets are priced: it tells us the return required for a given level of risk.
‐ In this course, we will study the relationship between risk and return; portfolio theory, Capital Asset Pricing
Model, cost of capitals, and market efficiency.
2
17/07/2013
What is corporate finance?
• Corporate finance addresses 3 questions:
– what do businesses invest in?
– how do businesses fund these investments?
– how do businesses manage everyday financial activities? • In this course we will focus on the first two.
5
What is corporate finance?
• Examples:
• What do businesses invest in?
– machinery, buildings, takeovers (of other businesses)
• How do businesses finance them?
– Business can raise external funds in two ways.
–
Finance
Semester 2, 2013
Seminar 1
Introduction to finance & ethics in finance
Ross et al. chapter 1.
These powerpoint slides have been adapted from Frank Finn
Professor of Finance Tom Smith’s (UQ) teaching material of
“Three key finance ideas of valuation” and Dr. Scott McCarthy’s teaching material.
1
What is Finance?
• Every business is a process of acquiring and disposing assets: real assets and financial assets. • Finance is a science of valuation and management of assets.
• The field of finance deals with the concepts of time, money, risk and how they are interrelated. 1
17/07/2013
Two Key Valuation Ideas
The Time Value of Money
In studying the time value of money, we will see it forms the basis for all asset valuations. In this course, we will study the following aspects of the time value of money:
Time Value of Money
Financial
Mathematics
Valuing
Stocks
Valuing
Bonds
Making
Investment
Decisions
Two Key Valuation Ideas
Diversification
‐ Financial market participants want to make as much money as possible with the least risk. To reduce risk, market participants can diversify. If everyone diversifies, this tells us something about how assets are priced: it tells us the return required for a given level of risk.
‐ In this course, we will study the relationship between risk and return; portfolio theory, Capital Asset Pricing
Model, cost of capitals, and market efficiency.
2
17/07/2013
What is corporate finance?
• Corporate finance addresses 3 questions:
– what do businesses invest in?
– how do businesses fund these investments?
– how do businesses manage everyday financial activities? • In this course we will focus on the first two.
5
What is corporate finance?
• Examples:
• What do businesses invest in?
– machinery, buildings, takeovers (of other businesses)
• How do businesses finance them?
– Business can raise external funds in two ways.
–