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Corporate Finance

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Corporate Finance

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  1. Corporate Finance 473.32 Weeks 1 & 2 Winter 2014 Bruce Duggan Providence University College

  2. Corporate Finance

  3. Corporate Finance

  4. Corporate Finance it’s hard work 2-3 hr for each class hour 6-9 hrs/week not as complicated as it looks worth knowing Falling behind will kill you

  5. Corporate Finance supports text supplements tutoring each other me

  6. do S&P problem p 25 read “The Danger of the Bounce” highlight the first 10 things you don’t understand ch 2 summary p 42-43 highlight everything you don’t understand join Investopedia Canadian Game http://www.investopedia.com/simulator/portfolio/nogamestotradein.aspx For Fri • www.mcgrawhill.ca/edumarketinsight

  7. Corporate Finance 1 core idea • r • r • then • If • > • activities • funders

  8. Corporate Finance Capital Budgeting Long-term investments which ones? Capital Structure Long-term financing where? Working Capital Management Ongoing financial activities how?

  9. Financial Management “The goal of financial management…is to is to make decisions that increase the value of the stock.”

  10. Financial Management The Agency Problem agency cost executive compensation options poison pill non-voting shares corporate governance stakeholders • pg 15

  11. Financial Management The Agency Problem risk reward control

  12. Financial Ethics “…truthful financial reporting is incredibly important to the long run viability of capital financial markets….The ability of companies to raise capital and of our economies to function efficiently is based on this trust and confidence. If investors cannot assume that the information they receive is honest and truthful, many of the models and theories we learn through this textbook no longer apply.”

  13. Financial Markets

  14. Financial Markets money market capital market

  15. Financial Markets money market short-term debt dealer market money-market instruments bankers’ acceptances short-term borrowing by large corporations treasury bills purely electronic

  16. Financial Markets money market capital market TSE NYSE debt & shares longer-term

  17. Financial Markets money market capital market debt & shares primary market secondary market • bought from companies • bought & sold • between “market members”

  18. Financial Markets money market capital market debt & shares primary market secondary market dealer markets Over-The-Counter market auction markets place for buyer & seller to meet trades mediated by brokers • no counter

  19. Financial Markets current trends increasing speed complexity reach volatility financial engineering derivatives

  20. Financial Markets current trends increasing speed complexity reach volatility decreasing barriers to access costs

  21. Financial Markets future trends increasing oversight transparency

  22. Ch 2

  23. Financial Statements + Balance Sheet Income Statement Cash Flow + Taxes Capital Cost Allowance

  24. Balance Sheet • Assets __________ __________ __________ __________ • Liabilities __________ __________ __________ __________ • Equity __________ • $A • $L + $E

  25. Balance Sheet • net • working • capital • (~“liquidity”) • Current Assets • Current Liabilities

  26. Balance Sheet • net • working • capital • (~“liquidity”) • Current Assets • Current Liabilities • liquid firms less likely to experience distress • BUT • liquid assets earn lower returns

  27. Balance Sheet • Current Assets • Current Liabilities • Long-term debt • Fixed assets • tangible • intangible • Equity • book value

  28. Balance Sheet

  29. Balance Sheet

  30. Balance Sheet

  31. Balance Sheet

  32. Balance Sheet

  33. Balance Sheet

  34. Canadian Enterprises • 2006 • 2005

  35. Canadian Enterprises • 45% • 12% • 40% • 15% • 15% • 15% • 73% • 70% • 55% • 60% • 2006 • 2005

  36. Canadian Enterprises 2006 Income Statement ($ millions)

  37. Canadian Enterprises 2006 Income Statement ($ millions)

  38. Canadian Enterprises • $309 • 2006 • 2005

  39. Canadian Enterprises Cash Flow “There is a standard accounting statement called the statement of cash flows, but it is concerned with a somewhat different issue and should not be confused with what is discussed in this section.” • [F]

  40. Canadian Enterprises • Cash Flow [F] • where it comes from • who gets it

  41. Canadian Enterprises • where it comes from

  42. Canadian Enterprises • where it comes from

  43. Canadian Enterprises • where it comes from

  44. Canadian Enterprises • where it comes from

  45. Canadian Enterprises • where it comes from

  46. Canadian Enterprises • where it comes from

  47. Canadian Enterprises • where it comes from

  48. Canadian Enterprises • where it comes from • “free” cash flow

  49. Canadian Enterprises Cash Flow [F] where it comes from who gets it either creditors or shareholders