Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

Finance 1.Financial Planning 2.Financial Analysis 3.Principles of Investments 4.Cash Management Control 5.Financial Forecasting a.Cost projection  Start-up costs  Monthly expenses  Working Capital  Variable cost  Sales projection b.Break-even point c.Pro Forma financial statements  Income Statement  Balance Sheet  Cash Flows d. Ratio Analysis  ROI  ROE  Net Working Capital  Other Ratios e. Capital Requirements 6. Financial Risk Management

Principles of Investments Investment: An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In finance, an investment is a monetary asset ( stocks, bonds, CDs, real estate property….) purchased with the idea that the asset will provide income in the future and be sold at a higher price. The risk-return tradeoff and the efficient pricing of the financial assets-are central to the investment process Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

Topics that you should know: 1- How to measure risks? 2- How to create portfolios? 3- Risk-Return tradeoff 4- Projects valuation 5- Calculating bank loans Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

1- How to measure risks There are many statistical techniques that can be used to measure the risk: -Variance -Standard Deviation It depends on your type of business that you plan to establish. If your business is to create a company to invest in the financial markets securities, then you should understand how to measure risk for the securities as well as for the market. Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

2- How to create portfolios It depends on the type of business that you have planned to open. The most important thing here is to understand that diversification can reduce risk. If you plan to operate financial company and buy stocks, bonds, CDs and other financial securities, then you should know how to measure the portfolio risk and return. Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

3- Risk-Return tradeoff Higher risk is associated with greater probability of higher return and lower risk with a greater probability of smaller return. Example: Consider your investment by just putting your money in a bank. What is the expected return on 1 million AED if the bank interest rate is 4.25% for one year. Now consider your investment in stock market with 20% rate of return for one year. What is the expected rate of return? Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

4- Project valuation If you have the opportunity to choose from different types of projects. Which one is better? ( From financial perspectives) 1- Net Present Value (NPV): is the difference between the present value of cash inflows and the present value of cash outflows. Money now is more valuable than money later on Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen

2. Profitability Index (PI): The profitability index (PI) is the present value of future cash flows divided by the initial cost. 3- payback period (PP): The number of years required to recover a project’s cost. how long does it take to get the business’s money back? 4- other methods such as IRR, MIRR, DPP Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen Exercise: Using Excel sheet

5- Calculating bank loans You need to know the Future Value for the loan and divide that on the number of months. What are the differences between Islamic Banking and Conventional Banking? Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen Exercise: Using Excel sheet

References Drew, Michael …atl (2013) “Principles of Investments”, Mc Graw Hill, New York. B. Scott, B. Eugene (2014), Principles of Finance, 6 th edition, Cengage, USA. Jae K. Shim (2012) “Financial Analysis Forecasting and Modeling, 3 ed Edition, Pearson Education. New York. Mike E. Miles and Laurence M. Netherton (2015) "Real Estate Development - 5th Edition: Principles and Process; Urban Land Institute Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen