1. Finance Concepts & Current Topics

2. Course Detail  Basic financial language  Conceptual skills  Emphasis is on applying concepts to current financial topics  Reading & team intensive  Complete readings before class

3. Resources  FFM – Fundamentals of financial management  FMR – Fundamentals of finance reader  CFE – Course of financial English  Handouts/Website postings for current topics

4. Course overview by week  1 Introduction  2 Fundamental concepts  3 Financial assets  4 Capital budgeting  5 Capital structure  6 Working capital  7 Midterm exam  8 Derivatives  9 multinationals  10 hybrids  11 central banks  The Fed & PBOC  World Bank & IMF  Exchange rates  2008 financial crisis  Final exam

5. Assessments  Team presentations  Debates (maximum 10 bonus points)  Case presentations  Team formation due January 17  Quizzes (2)  Examinations (midterm & final)  Open book & notes

6. Contact Information  Office: 20/F Building B, S&T Plaza, TUSP, No. 1  Telephone: 15810169471  Email: popham10@yahoo.compopham10@yahoo.com  Website: www.schoolrack.com/BillCurtiswww.schoolrack.com/BillCurtis

7. An Overview of Financial Management Chapter 1

8. Financial management areas  Money & capital markets  Investments  Financial management

9. Money & capital markets  Money  A commodity or asset, such as gold, an officially issued currency, coin or paper note, that can be legally exchanged for something equivalent, such as goods or services.  Capital  Financial assets or the financial value of assets, such as cash, available for use  Capital markets  Financial markets that facilitate the flow of long- term funds

10. Current trends in finance  Globalization  Is McDonald’s an American company?  Over 60% of its net income is generated outside the U.S.  Information technology  Space  Time  Information access  Electronic commerce

11. Forms of business organization  Sole proprietorships  Partnerships  Corporations

12. Sole proprietorship  Unincorporated business owned by an individual  Advantages  Easy and inexpensive to start  Few government regulations  Avoids corporate income taxes  Disadvantages  Difficult to obtain capital  Unlimited liability  Legal debts or obligations that arise during the course of business operations.  Life of the business limited to the life of the owner

13. Partnership  An unincorporated business owned by 2 or more persons  Advantages are similar to sole proprietorships, plus:  Specialized expertise  Synergy among partners (1+1=3?)  Disadvantages  Unlimited liability  Limited life of the organization  Difficulty in transferring ownership  Mutual obligations  Difficulty to raise large amount of capital

14. Corporation  A legal entity (person) separate from its owners and managers  Advantages  Unlimited life  Easy transferability of ownership  Limited liability  Can raise large amount of capital (stocks & bonds)  Disadvantages  Setting up a corporation  Double taxation (corporate and earnings paid out as dividends)  Subject to take-over

15. Staff and management goals  Financial staff responsibility:  obtain and use funds to maximize the value of the firm  Management responsibility:  Maximize stockholder’s wealth = maximize stock value  Other responsibilities?  Ben & Jerry’s?  Business ethics—company’s attitude and conduct toward its employees, customers, suppliers, community, employees, stockholders

16. Agency relationships  Principals hire agents to perform services (delegation)  Financial management’s agency relationships:  Stockholders and managers  Managers and debt holders (creditors)  Agency problem  A potential conflict of interests between the agent and stockholders or creditors

17. Agency relationships  Motivating managers to act in the stockholders best interests  Performance shares  Executive stock options  Direct intervention by stockholders (institutional investors)  Threat of firing  Threat of hostile take-over

18. Managerial actions to maximize shareholder wealth  What determines the price of a company’s stock? Factors include:  A financial asset is related to its ability to generate cash flows  Timing of cash flows—sooner is better  Investors are risk averse—they’ll pay more for stock that generates consistent cash flows  Investment decisions  How to finance the firm  Debt & equity mix  Dividend policy decision—what to give out, what to retain