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BUS 150 – Wisconsin Lutheran College Exploring Business 2.0 © 2012 Flat World Knowledge 13-1.

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Presentation on theme: "BUS 150 – Wisconsin Lutheran College Exploring Business 2.0 © 2012 Flat World Knowledge 13-1."— Presentation transcript:

1 BUS 150 – Wisconsin Lutheran College Exploring Business 2.0 © 2012 Flat World Knowledge 13-1

2 Chapter Objectives 1. Identify the functions of money and describe the three government measures of the money supply. 2. Distinguish among different types of financial institutions. 3. Discuss the services that financial institutions provide and explain their role in expanding the money supply. 4. Identify the goals of the Federal Reserve System and explain how it uses monetary policy to control the money supply and influence interest rates. Exploring Business 2.0 © 2012 Flat World Knowledge 13-2

3 Chapter Objectives 5. Explain the ways in which a new business gets start- up cash. 6. Identify approaches used by existing companies to finance operations and growth. 7. Show how the securities market operates and how it’s regulated. 8. Understand how market performance is measured. 9. Define equity and debt financing, and discuss the advantages and disadvantages of each financing approach. 10. Discuss career opportunities in finance. Exploring Business 2.0 © 2012 Flat World Knowledge

4 Functions Of Money Exploring Business 2.0 © 2012 Flat World Knowledge 13-4 Medium Of Exchange Measure Of Value Store Of Value

5 Money Supply cash (paper bills and coins) and funds held in demand deposits. (Checking accounts that pay given sums to “payees” when they demand them.) Savings monies “saved” for future use. includes interest-bearing accounts, time deposits (such as certificates of deposit, which pay interest after a designated period of time), and money market mutual funds - accounts that pay interest to investors who pool funds to make short- term loans to businesses and the government. Exploring Business 2.0 © 2012 Flat World Knowledge 13-5

6 Money Supply–Gov’t definitions M-1 - the narrowest measure includes the most liquid forms of money—the forms, such as cash and checking-accounts funds, that are spent immediately M-2 includes everything in M-1 plus near-cash items invested for the short term—savings accounts, time deposits below $100,000, and money market mutual funds. Exploring Business 2.0 © 2012 Flat World Knowledge 13-6

7 U.S. Money Supply Exploring Business 2.0 © 2012 Flat World Knowledge 13-7 Why is one growing and not the other?

8 Economics 101 Supply and Demand set prices (value) Packer tickets / last used textbook for a class sold on e-bay / babysitter in neighborhood What happens if forecast for game is cold, rainy, etc.? What happens if a class changes textbooks and a whole group of students list book for sale? What happens if two new families move into the neighborhood each with three teenage girls What if the government starts printing larger amounts of excess money?

9 Depository Institutions o Commercial Banks o Savings (Thrifts) Banks o Credit Unions Exploring Business 2.0 © 2012 Flat World Knowledge 13-9

10 Nondepository Institutions o Finance Companies o Insurance Companies o Brokerage Firms Exploring Business 2.0 © 2012 Flat World Knowledge 13-10

11 Services Offered By Banks  Checking/Savings Accounts  ATMs  Credit/Debit Cards  Loans  Financial Advice  Sell Financial Products  Insurance  Electronic Banking Exploring Business 2.0 © 2012 Flat World Knowledge 13-11

12 Bank Regulation o Federal Depository Insurance Corporation o 1933 o Insures Deposits ($250,000) o Periodic Examinations o Office of Thrift Supervision o National Credit Union Administration Exploring Business 2.0 © 2012 Flat World Knowledge 13-12

13 The Fed and Monetary Policy Goals o Price Stability o Sustainable Economic Growth o Full Employment Exploring Business 2.0 © 2012 Flat World Knowledge 13-13 Tools Reserve Requirements Discount Rate Open Market Operations

14 Key Interest Rates Exploring Business 2.0 © 2012 Flat World Knowledge 13-14

15 The Fed - Banker’s Bank & Government’s Banker o Clears Checks o Holds U.S. Treasury’s Checking Account o Processes Paperwork in Buy/Sell Government Securities o Collects Federal Tax Payments o Lends to Government using T-Bonds Exploring Business 2.0 © 2012 Flat World Knowledge 13-15

16 Finance “…all the activities involved in planning for, obtaining, and managing a company’s funds.” Exploring Business 2.0 © 2012 Flat World Knowledge 13-16

17 Financial Manager Exploring Business 2.0 © 2012 Flat World Knowledge 13-17 “…financial manager determines how much money the company needs, how and where it will get the necessary funds, and how and when it will repay the money…”

18 Developing A Financial Plan o Calculate Funds Needed o Estimating Sales o Project Costs o Getting The Money o Owner’s Personal Assets o Loans- Family/Friends o Bank Loans o Making The Financing Decision Exploring Business 2.0 © 2012 Flat World Knowledge 13-18

19 Where Small Businesses Get Funding Exploring Business 2.0 © 2012 Flat World Knowledge 13-19

20 Loan Characteristics 1) Maturity Short-Term, Intermediate, Long-Term Line of Credit Amortization 2) Security Collateral Unsecured 3) Interest Exploring Business 2.0 © 2012 Flat World Knowledge 13-20

21 Growth Stage Financing o Managing o Cash Flow o Accounts Receivable o Accounts Payable- Trade Credit o Budgeting- financial plan o Cash o Capital Exploring Business 2.0 © 2012 Flat World Knowledge 13-21

22 Investors o Private Funding o Angels and Venture Capitalists o Public Financing o Steps in Going Public o Initial Public Offering o Investment Banking Firm o Securities and Exchange Commission Exploring Business 2.0 © 2012 Flat World Knowledge 13-22

23 Securities Markets o Markets o Primary o Secondary o Organized Exchanges o New York Stock Exchange o American Stock Exchange o Over-The-Counter o NASDAQ Exploring Business 2.0 © 2012 Flat World Knowledge 13-23

24 Securities & Exchange Commission o Congress created SEC in 1934 o Purpose: To provide investors with confidence in the stock market o Enforces Securities Laws Designed to: o Promote full disclosure o Protect investors against misconduct o Maintain integrity of securities markets Exploring Business 2.0 © 2012 Flat World Knowledge 13-24

25 Measuring Market Performance o Market Indexes o Dow Jones Industrial Average o NASDAQ Composite o S & P 500 o Bull vs. Bear Market o Reading A Stock Listing Exploring Business 2.0 © 2012 Flat World Knowledge 13-25

26 DJIA for 10-Year Period Exploring Business 2.0 © 2012 Flat World Knowledge 13-26

27 Measuring Market Performance o Market Indexes o Dow Jones Industrial Average o NASDAQ Composite o S & P 500 o Bull vs. Bear Market o Reading A Stock Listing Exploring Business 2.0 © 2012 Flat World Knowledge 13-27

28 NASDAQ for 10-Year Period Exploring Business 2.0 © 2012 Flat World Knowledge 13-28

29 Measuring Market Performance o Market Indexes o Dow Jones Industrial Average o NASDAQ Composite o S & P 500 o Bull vs. Bear Market o Reading A Stock Listing Exploring Business 2.0 © 2012 Flat World Knowledge 13-29

30 Stock Listing for Hershey Foods Exploring Business 2.0 © 2012 Flat World Knowledge 13-30 www.aol.com http://www.dailyfinanc e.com/investor- center/market-minute/

31 Interpreting A Stock Quotation Exploring Business 2.0 © 2012 Flat World Knowledge 13-31 TermExplanation 52-Week HIHighest price in last year 52-Week LOLowest price in last year Stock (Symbol) Symbol of listing DIVAnnual dividend per share YLD %D/E yield on closing price PEInvestors pay on $1 earnings VOLVolume of shares traded ClosePrice at close of business day

32 Options for Financing The Going Concern Equity Financing Stock Debt Financing Bonds Exploring Business 2.0 © 2012 Flat World Knowledge 13-32

33 Stockholders’ Equity o Risk/Reward Tradeoff o Types of Stock o Common o Preferred o Cumulative o Convertible Exploring Business 2.0 © 2012 Flat World Knowledge 13-33

34 Bonds “…debt securities that obligate the issuer to make interest payments to bondholders and to repay the principal when the bond matures.” Exploring Business 2.0 © 2012 Flat World Knowledge 13-34 Treasury Bills/Bonds & Municipals (munis)

35 Career Positions In Finance o Commercial Banking o Corporate Finance o Analyze Industry Trends o Evaluate Corporate Investment o Conduct Financial Planning o Evaluate Acquisitions o Review Financial Needs Exploring Business 2.0 © 2012 Flat World Knowledge o Investment Industry o Graduate Education & Certification o CFA o CFM o CCM o CFP o CTP 13-35

36 Chapter 5 Project Slide 1 – Company / History Slide Slide 2 – Financial Numbers (below) – Compare and Explain Slide 3 – 5 Year Stock Prices versus ?? (competitor, index, etc.) Slide 4 – Key Financial news http://money.cnn.com/magazines/fortune/fortune500/2011/full_list/ www.random.org http://money.cnn.com/quote/quote.html?symb=ASBC

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