Advanced Managerial Finance (BA 519) Indudeep S. Chhachhi.

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Presentation transcript:

Advanced Managerial Finance (BA 519) Indudeep S. Chhachhi

Chhachhi/519/Ch. 02 Financial Management Crucial element in the setup of any organization Really Important Things You Need to Know Does not exist in isolation It only exists within the context of a company’s broader operating characteristics and strategies

Chhachhi/519/Ch. 03 Really important things you need to know (to advance your career today) #1: “Finance. Eat your spinach. Finance is at the core of so many successful companies that no CEO aspirant can afford to avoid schooling in it... This will help you understand, among other things, how your company raises and allocates capital. It will also make clear why that new product your team has designed might not be launched, despite its sensational showing in test markets: The numbers indicate that most likely the returns will never clear the hurdle rate that will cover the cost of capital it requires and deliver a profit as well.” Fortune Magazine, January 15, 1996, p. 36.

Chhachhi/519/Ch. 04 Financial Management--Contd. How does a fin. manager create value for the firm’s shareholders? Financial management functions: Investment decision Financing decision Working Capital decision An optimal combination of the three decisions will create value!

Chhachhi/519/Ch. 05 What can you expect from BA 519? What does today’s Manager (YOU) need to know about Financial Management? 1.Theoretical understanding of concepts and analytic techniques that make up the discipline called FINANCE Capital asset pricing model (CAPM), Asset Valuation, Capital budgeting, market signaling, agency problem,.....

Chhachhi/519/Ch. 06 What can you expect from BA 519? 2.Application & Interpretation of these techniques in decision making Growth in Judgment RATHER than a simple accumulation of knowledge

Chhachhi/519/Ch. 07 Course Preparation Time Constraints! Facilitator of Learning! Read assigned material Prior to the class Why is the class demanding?? Quantitative nature of discipline Review background material Theoretical foundation of Finance Real-life decision making

Chhachhi/519/Ch. 08 Course Preparation-- Contd. Print Power Point slides (from the web) hmba519.htm

Chhachhi/519/Ch. 09 Syllabus-- Contd. Case Discussions Real-life decision making Learning “judgement” Readings Class participation Grading

Chhachhi/519/Ch. 010 Economic Roller Coaster!!

Chhachhi/519/Ch. 011 Stock Market Indices

Chhachhi/519/Ch. 012 Stock Market Indices

Chhachhi/519/Ch. 013 Numbers behind this Bull Market : Indices went up each year in the ball park of 20%!! : First time since that indices were down three consecutive years! Two consecutive UP years (Thank What’s Next???

Chhachhi/519/Ch. 014 Corporation vs. Partnership Partnerships: Unlimited liability BUT limited growth opportunities Corporation: Limited liability, unlimited growth opportunities, BUT Double Taxation AND AGENCY PROBLEM

Chhachhi/519/Ch. 015 Pay for Performance? Pay Packages getting “risk-free.” Signing bonuses, “guaranteed” bonuses, stock option repricing…. Where have the directors gone? Pay-setting process has to be fair & equitable.

Chhachhi/519/Ch. 016 Goal of a Corporation Is NOT to maximize sales to maximize market share to maximize profits At best incomplete and at worst misleading Can result in failure over the long-term! PRIMARY GOAL should be to: Maximize Shareholder Wealth.