1. Fundamentals of Finance Tom C. Nelson, PhD
9/17/2018
CUBIC 2014 Section 1
Fundamentals of Finance
Tom C. Nelson, PhD
CUBIC Fundamentals of Finance

2. Fundamentals of Finance Topics
What is Finance?
The measurement and study of an organization’s cash flows in order to make business decisions related to its:
Operations
Investments
Financing
Activities:
Budgeting, planning, valuation, decisions

3. Fundamentals of Finance Topics
Course Objectives
• a working knowledge of the terminology of finance and
fundamental concepts and tools used in the business world;
• an understanding of the interrelationships between accounting and finance;
• an understanding of the interrelationships between business
management and a firm's financial statements;
• an introduction to financial markets, the time value of money, risk
and return, and the valuation of assets and business projects.

4. Fundamentals of Finance Topics
1) Introduction to Financial Management
Financial Decisions/Activities
Careers in Finance
Business Forms
Financial Markets

5. Fundamentals of Finance Topics
2) Sources of capital funding for companies
Retained profits
Bonds and bank loans
Stock

6. Fundamentals of Finance Topics
3) Financial Statements and Analysis
Balance Sheet
Income Statement
Cash Flows
Financial Analysis—Ratios
Case #1: Financial Analysis: Vail Resorts

7. Fundamentals of Finance Topics
4) Capital Budgeting
Introduction to Capital Budgeting
Capital Budgeting Tools
Determining Relevant Cash Flows
Developing Cash Flow Projections
Determining Cost of Capital
Case #2: Business Start-up Decision:
Naturally Wrapped Food Stand

8. What is your opinion of the field of finance?
Clicker Question (1.1)
What is your opinion of the field of finance?
A. I may pursue a career in finance
B. I want to understand finance to better myself
C. I find finance more of a “necessary evil”
D. I really don’t see myself needing/using finance
E. My opinion of finance is still “up in the air”

9. 1-0 Introduction to Financial Management
Topics
1-1 Financial Decisions/Activities
1-2 Careers in Finance
1-3 Business Forms
1-4 Financial Markets

10. Financial activities and decisions can be divided into 3 areas:
Introduction to Financial Management 1-1 Financial Decisions/Activities
Financial activities and decisions can be divided into 3 areas:
Operating:
Day to day operations to create profit
Managing the income statement

11. Introduction to Financial Management 1-1 Financial Decisions/Activities
Financial activities and decisions can be divided into 3 areas: 2) Investing How is firm money spent on assets? Managing the left side of the Balance Sheet current assets--working capital management fixed assets--capital budgeting

12. Introduction to Financial Management 1-1 Financial Decisions/Activities
Financial activities and decisions can be divided into 3 areas: 3) Financing Focus on the sources of the Firm’s capital (debt and equity) Managing the right side of the Balance Sheet Amount and type of debt and equity--capital structure

13. Introduction to Financial Management 1-1 Financial Decisions/Activities

14. Introduction to Financial Management 1-2 Careers in Finance
Career Areas:
Corporate
Public and private companies, large and small
Institutional
Banks, insurance companies
Investment
Brokerage firms, investment banks
Real estate
International

15. Introduction to Financial Management 1-2 Careers in Finance
Career Considerations:
Structured AND creative
Quantitative AND strategic
Financial knowledge can be used in:
General business OR specialized finance areas

16. Introduction to Financial Management 1-2 Careers in Finance
Corporate finance careers—examples:
Financial accountant
Cash manager
Credit manager
Financial analyst
Risk management
Audit/fraud/compliance
Budget director (budget, planning, and forecasting)
Treasurer
Director of finance
Chief financial officer

17. Introduction to Financial Management 1-2 Careers in Finance
Institutional finance careers—examples:
Investment banking analyst
Trust officer
Commercial bank loan officer
Audit officer
Banking analyst
Branch manager
Vice president

18. Introduction to Financial Management 1-2 Careers in Finance
Investment finance careers—examples:
Financial advisor
Stock broker
Personal financial planning
Financial analyst
Security analyst
Portfolio manager (mutual funds, hedge funds)
Financial engineer

19. Introduction to Financial Management 1-2 Careers in Finance
Real estate finance careers—examples:
Real estate broker
Mortgage banker
Appraisal/valuation analyst
Leasing analyst
Commercial broker

20. Introduction to Financial Management 1-2 Careers in Finance
International finance careers—examples:
All of the previous careers outside the US
Foreign exchange analyst
International risk manager
Finally: Financial Consulting
Consulting on any of the above!
On-line resource:

21. Clicker Question (1.3)
Do you seriously think you might start your own business sometime in your career?
A. Yes
B. No

23. Introduction to Financial Management 1-3 Business Forms
Sole Proprietorship
Business owned by a single individual
Partnership
A business formed by two of more individuals or entities
Corporation (“C” Corporation)
A business created as a distinct legal entity owned by one or more individuals or entities.

24. Introduction to Financial Management 1-3 Business Forms
“Hybrids”
Generally, smaller entities which allow for the pass through of income (single tax event) and have limited liability.
Examples:
Sub S Corporation
General/Limited Partnership
Limited Liability Partnership (LLP)
Limited Liability Corporation (LLC)

25. Introduction to Financial Management 1-3 Business Forms
Item
Sole Prop
Partnership
Corporation
“Hybrids”
Number
Many
Few
Size
Small
Small-Medium
Small-Large
Liability
Unlimited
Limited
Tax
Pass Through
Double taxed
Owners
Proprietor
2+ Partners
Shareholders
Partners or shareholders
On-line resource:

26. Introduction to Financial Management 1-4 Financial Markets
Financial Intermediaries
Connecting the producers of capital with the consumers of capital

27. Introduction to Financial Management 1-4 Financial Markets
Primarily versus secondary markets
Primary markets—original issuance of securities to the market
Secondary markets—all subsequent trading of securities