Managerial Finance MBA 632 P.V. Viswanath Comments for beginning of class Spring 2004

P.V. Viswanath2 What we will do today (February 11)  Go over issues from Feb. 4  Go over problems assigned last week  Do Chapter 17  Do cashflow computation and examples with Lifeway Foods, Inc. (LWAY)  Discuss Quiz 1  Evaluation

P.V. Viswanath3 Issues from February 4  How to follow cashflows from all activities  Time value of assets  Definition and type of cashflows  Other determinants of growth potential  Can I begin to think in finance terms?  Find the values on the statement needed for the equations  How will the cashflows affect a company’s future?  What does the change in net working capital etc. mean to management – is it good or bad?  Why do we need the alternative way of computing cashflows?  Determining accurate market value of a firm  Identity vs. definition

P.V. Viswanath4 Wishlist from Feb. 4  Keep door open  Don’t speak so fast; ask students if they understand  Explain the calculations for cashflows  Speed up explanations in class  More problems practiced in class  Can’t you just call on volunteers? Don’t call students randomly; I am trying to write down my notes.  More detailed examples.  Real-life examples  End class early

P.V. Viswanath5 Quiz 1  Definitions of terms from Chaps 1, 2, 3, 17  Computation of cashflow numbers for a firm  Computation of financial ratios for a firm

P.V. Viswanath6 Issues from March 3 -Slow down -Write more clearly on the board -A little hurried. I like the examples but they seem rushed -Make “revised” PowerPoint lecture notes available earlier than the day of class -Why is your lecture is quite different from the book. How can I concentrate on preparing for exams? - How to calculate growth rates

P.V. Viswanath7 Issues to keep in mind  Everything we do in class is related to other things.  When we do present value, you cannot forget financial statements  Since I want to focus on connections, so sometimes I go ahead. That’s why I went on to the issue of risk.  We will revisit things that are not clear; that’s why I solicit your comments.  We will certainly revisit statistics – mean, variance, correlation, etc.

P.V. Viswanath8 What we will do, today, March 10  Effective Annual Rate  Valuation of stock

P.V. Viswanath9 What we will do March 24  Finish up Chapter 7 and what we need from Chapter 8.  Make sure you do all the assigned problems. There are not a lot of new concepts, so I will focus on doing problems.

P.V. Viswanath10 Questions from March 10  Difference between rates  How to solve problems by myself  When would knowing the effective rate be useful?  Post solutions  Issues with quiz Only one question Tricky! Why did we do problems just before quiz? Do it a week before quiz. Less time on quiz; more time on problems.

P.V. Viswanath11 Midterm  Covering material on Chaps 2, 3, 4, 5 (limited to what was covered in class), 6 and 17  Three sections Definitions Short Questions Problems Chap 4 – Present Value Chap 3 – Accounting Ratios Chap 17 – Cashflow computations Chapter 5 – Valuing Bonds Valuing Stocks – using only the material that was covered in class

P.V. Viswanath12 Midterm  Concepts you should know (non-exhaustive) DuPont Identity APR and EAR CAPM – just the basics of the formula Financial Ratios Computation of Cashflows Nominal and Real cashflow and interest rates Agency Costs and Conflicts of Interests Bond Pricing Stock Pricing

P.V. Viswanath13 Today, March 24 and later  Go over Chapter 5 – Valuing Bonds  Focus on problems  Review sessions on Monday 3/29, Friday 3/26

P.V. Viswanath14 Comments from April 14  Correlation and covariance  Variance and beta as risk measures  Beta and variance estimation  Stick to the book

P.V. Viswanath15 Plan for April 28 and May 5  Risk and Return  Overview of Capital Structure – Chap. 13, 14 for terminology  Chap. 15 in class

P.V. Viswanath16 What we did this term  Focus on concepts and application – usefulness for a manager  Student focus – trying to ensure that the material is understood by students at the right conceptual level  Sensitivity to what students have understood, what they have not understood.  Special extra sessions

P.V. Viswanath17 What we did this term  Understand what should be the objective of the firm's managers.  Manipulate formulas based on the time value of money.  Interpret the firm's financial statements  Use cash flow information to evaluate a firm/project.  Use financial statement information to value stocks and bonds  Decide how to finance a firm on a basic level.