Introduction to Financial Accounting
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Definition of Corporate Finance
Capital Budgeting
Capital Sources
Example of Corporate Finance
Lesson Summary
Quiz 1.1
Financial Guidance
Corporate Financial Management
Capital Investments
Financial Reporting
Financial Forecasting
Lesson Summary
Quiz 1.2
Business Organizations
Unlimited Liability Organizations
Limited Liability Organizations
Lesson Summary
Quiz 1.3
Limited Liability Company
Tax Advantage
Liability Advantage
Lesson Summary
Quiz 1.4
Managing Money
Goals of Financial Management
Effects of Profit Maximization
Lesson Summary
Quiz 1.5
The Best Interests of the Stockholders
What Is the Agency Problem?
Real Life Examples
Lesson Summary
Quiz 1.6
Financial Markets
Short- & Long-Term Financial Assets
Capital & Money Markets
Primary & Secondary Capital Markets
Primary & Secondary Money Markets
Lesson Summary
Quiz 1.7
The Balance Sheet
Balance Sheet Components
Balance Sheet Presentation
Lesson Summary
Quiz 2.1
GAAP and the Financial Statements
What Are the Financial Statements?
Preparing the Income Statement
Preparing the Statement of Retained Earnings
Lesson Summary
Quiz 2.2
Definition of Corporate Taxes
Graduated Tax System
Corporate Tax Rate Calculation
Lesson Summary
Quiz 2.3
Marginal Tax Rate
U.S. Marginal Tax Rates History
Calculating Tax Liabilities
Lesson Summary
Quiz 2.4
What Is the Average Tax Rate?
Conceptual Framework
Formula
Lesson Summary
Quiz 2.5
Definition of Cash Flow
Formulas
Lesson Summary
Quiz 2.6
Cash Control
Components of Cash
Internal Control
Lesson Summary
Quiz 3.1
Kaycie and the Financial Statements
Introducing the Financial Statements
What Do Each of the Financial Statements Do?
Why Are the Financial Statements Important?
Lesson Summary
Quiz 3.2
The Adjusted Trial Balance
Creating the Income Statement
Statement of Retained Earnings
The Balance Sheet
Lesson Summary
Quiz 3.3
Financial Statement Ratios Defined
The Ratios
Examples
Interpreting the Ratios
Lesson Summary
Quiz 3.4
Liquidity Ratio Defined
Current Ratio
Acid Ratio
Cash Ratio
Lesson Summary
Quiz 3.5
Financial Planning Process
Three Essential Questions
Cash and Profit Planning
Other Factors to Consider
Budgets
Lesson Summary
Quiz 4.1
Business Financial Planning
Financial Planning Models
Financial Planning Model Elements
Financial Planning Model in Action
Sales Forecast
Pro Forma Financial Statement
Asset Requirements
Financial Requirements
Plug
Economic Assumptions
Lesson Summary
Quiz 4.2
Percentage of Sales Method
Percentage of Sales Calculations
Determining the Sales Forecast
Retained Earning Changes
Forecasted Financial Statements
Lesson Summary
Quiz 4.3
Planning the Future
Internal Growth Rate
Sustainable Growth Rate
What Determines Growth
How Much Is Needed?
Lesson Summary
Quiz 4.4
Growth Rate
Types of Growth Rate
Internal Growth Rate
Sustainable Growth Rate
Determinants
Lesson Summary
Quiz 4.5
What is Future Value?
Future Value Formula
Future Value Examples
Lesson Summary
Quiz 5.1
The Time Value of Money
Future Value
Present Value
Future Value of an Annuity
Present Value of an Annuity
Lesson Summary
Quiz 5.2
Present Value Formula Defined
Formula
Another Example
Lesson Summary
Quiz 5.3
The Time Value of Money (a.k.a. Inflation)
Present and Future Value of Cash Flow
Calculating Present Value
Present Value: Multiple Cash Flows
Lesson Summary
Quiz 6.1
What Is an Annuity?
Examples of Annuity
The Value of Annuities
The Formula
Lesson Summary
Quiz 6.2
What is an Annuity?
The Formula
Labeling Your Numbers
Finding the Value of Your Annuity
Lesson Summary
Quiz 6.3
Definition of Perpetuity
Examples of Perpetuity
Calculating Perpetuity
Lesson Summary
Quiz 6.4
Compounding Interest Formula
Practice Problem #1
Practice Problem #2
Lesson Summary
Quiz 6.5
Loan Types
Pure Discount Loans
Interest-Only Loans
Amortizing Loans
Lesson Summary
Quiz 6.6
Using Bond Financing
Bond Financing Basics
Advantages of Bond Financing
Lesson Summary
Quiz 7.1
Bonds as Long-Term Debt
Indenture Agreement
Lesson Summary
Quiz 7.2
What Is a Bond?
Bond Rating Systems
Rating Scale
Lesson Summary
Quiz 7.3
Different Types of Bonds
Government Bonds
Municipal Bonds
Zero-Coupon Bonds
Floating-Rate Bonds
Lesson Summary
Quiz 7.4
Bonds: Definition
Pricing
Primary and Secondary Markets
Lesson Summary
Quiz 7.5
Evaluating Interest Rates
Real vs. Nominal Interest Rates
The Fisher Equation
Lesson Summary
Quiz 7.6
Bond Returns
Bond Yield
Yield Curve
Lesson Summary
Quiz 7.7
Common Stock Valuation
Discounted Cash Flow
Growth
Zero-Growth
Constant-Growth
Two-stage and Nonconstant Growth
Lesson Summary
Quiz 8.1
Definition of Stocks
Types of Stocks
Examples of Stocks in Play
Lesson Summary
Quiz 8.2
Buying and Selling Stock
Dealers
Brokers
Broker-Dealers
Lesson Summary
Quiz 8.3
The New York Stock Exchange
Organization of the NYSE
Trading Shares
Lesson Summary
Quiz 8.4
Definition of Net Present Value
Computing Simple NPV with Example
Business Example
Computing Multiple Year NPV
Lesson Summary
Quiz 9.1
What Is Payback Analysis?
Formula
Example
Lesson Summary
Quiz 9.2
Discounted Payback Period
Definition
Calculating Present Value Factor
Computing Discounted Payback Period
Advantage Over Ordinary Payback
Lesson Summary
Quiz 9.3
Average Accounting Return
Calculating AAR
Weaknesses of AAR
Lesson Summary
Quiz 9.4
Internal Rate of Return
Advantages of the IRR
Disadvantages of the IRR
Lesson Summary
Quiz 9.5
Modified Internal Rate of Return
Calculating the MIRR
Lesson Summary
Quiz 9.6
Is It Worth It?
The Profitability Index
Interpreting Results
Examples of the Profitability Index
Lesson Summary
Quiz 9.7
What Is Capital Budgeting?
Using Capital Budgeting
Cash Flows
Lesson Summary
Quiz 9.8
What Are Relevant Cash Flows?
Examining Relevant Cash Flows
Opportunity Costs
Cash Inflows and Outflows
Stand-Alone Principle
Lesson Summary
Quiz 10.1
Pro-Forma Financial Statements
Pro-Forma Balance Sheet
Pro-Forma Income Statement
Pro-Forma Statement of Cash Flow
Lesson Summary
Quiz 10.2
Depreciation and Cash Flow
MACRS
Book Value and Market Value
Depreciation Effects on Cash Flow
Lesson Summary
Quiz 10.3
Cost of Running a Business
Three Approaches
Barnaby Business Example
Lesson Summary
Quiz 10.4
Percentage vs. Dollar Returns
Dollar Returns
Percentage Returns
Which Method to Use?
Lesson Summary
Quiz 11.1
What is the Rate of Return?
Why Calculate It?
The Rate of Return Formula
Example
Lesson Summary
Quiz 11.2
Quantitative Analysis in Finance
Calculating Variance
What We Do with Variance
Standard Deviation
How Do We Use All These Numbers?
Lesson Summary
Quiz 11.3
The Normal Distribution
The Empirical Rule
Putting It All Together
Lesson Summary
Quiz 11.4
Overview of Financial Markets
Early Money Lending
Stock: Risk vs. Reward
Learning Through Trial and Error
Stop, Rethink, and Try Again
Lesson Summary
Quiz 11.5
Calculation of Returns
The Arithmetic Average
The Geometric Average
Lesson Summary
Quiz 11.6
Efficient Market Hypothesis
Forms of Market Efficiency
Lesson Summary
Quiz 11.7
What Is a Portfolio?
Portfolio Weight
Portfolio Variance
Lesson Summary
Quiz 12.1
Return on Assets
Expected vs. Unexpected Returns
Efficient Markets
Lesson Summary
Quiz 12.2
Understanding Systematic Risk
Portfolio Beta
Lesson Summary
Quiz 12.3
Risk and Investing
Security Market Line
Beta and the SML
Lesson Summary
Quiz 12.4
What Are Option Contracts?
Calls and Puts
Payoffs
Lesson Summary
Quiz 13.1
Derivatives
Options
Option Pricing
Lesson Summary
Quiz 13.2
What Are Stock Options?
Why Stock Options?
Value of Stock Options
Risks and Benefits
Lesson Summary
Quiz 13.3
Warrants and Call Options
Warrant
Call Option
Convertible Bond
Lesson Summary
Quiz 13.4
Overview
Required Return
Cost of Capital
Opportunity Cost
Lesson Summary
Quiz 14.1
What Is a Financial Policy?
What Is Cost of Capital?
Relationship
Lesson Summary
Quiz 14.2
What Is the Dividend Growth Model?
The Dividend Growth Model Formula
Estimate the Expected Growth Rate
Pros/Cons: Dividend Growth Model
Lesson Summary
Quiz 14.3
Capital Structure
Debt
Preferred Stock
Lesson Summary
Quiz 14.4
Project Decision
How Businesses Raise Money
Weighted Average Cost of Capital
Lesson Summary
Quiz 14.5
Cost of Capital
Divisional Cost
Lesson Summary
Quiz 14.6
Cost of Capital
How to Use
Pure Play Approach
Subjective Approach
Lesson Summary
Quiz 14.7
What Is a Capital Structure?
Cost of Debt
Cost of Equity
Lesson Summary
Quiz 15.1
Leverage
Corporate Borrowing
Lesson Summary
Quiz 15.2
Bankruptcy
Direct Costs
Indirect Costs
Lesson Summary
Quiz 15.3
Dividends
Types of Dividends
Standard Method
Lesson Summary
Quiz 16.1
Cash Dividends
Homemade Dividends
Does it Matter?
Lesson Summary
Quiz 16.2
Low Dividends
Taxes
Flotation Costs
Dividend Restrictions
Investor Benefits
Lesson Summary
Quiz 16.3
Dividends
Individual Investors
Institutional Investors
Lesson Summary
Quiz 16.4
What Are Dividends?
Information Content Theory
The Clientele Effect
Lesson Summary
Quiz 16.5
Stock Repurchase Defined
Why Buy Back Shares?
Cash Dividends
The Real World
Lesson Summary
Quiz 16.6
Some Basics on Corporations
Going Public With a Corporation
Ownership, Dividends, & Capital Gains
Stock Splits
Lesson Summary
Quiz 16.7
Business Assets
Net Working Capital
Tracking Cash
Lesson Summary
Quiz 17.1
Buying and Selling
Operating Cycle
Cash Conversion Cycle
Lesson Summary
Quiz 17.2
Definition of Cash Budgets
Cash Inflows and Outflows
Preparing a Cash Budget
An Example of a Cash Budget
Using a Cash Budget
Lesson Summary
Quiz 17.3
Definition of Business Loans
Short-Term vs. Long-Term Business Loan
Secured vs. Unsecured Loans
Lesson Summary
Quiz 17.4
Accumulating Cash
Speculative and Precautionary Motives
Transaction Motive
Compensating Balances
Costs of Holding Cash
Liquidity Management vs. Cash Management
Lesson Summary
Quiz 18.1
Cash Float
Disbursement & Collection Float
Net Float
Managing Your Float
EDI & Check 21
Lesson Summary
Quiz 18.2
Collection Time
Accelerating Collections
Lockbox System
Lesson Summary
Quiz 18.3
Disbursement
Float
Types of Disbursement Accounts
Lesson Summary
Quiz 18.4
Can Cash Be A Bad Investment?
Reasons for Cash Surpluses
Investing in Short Term Securities
Considerations of Investing
Lesson Summary
Quiz 18.5
Cash Balances in Business
The BAT Model
The Miller-Orr Model
Lesson Summary
Quiz 18.6
What Is a Credit Policy?
Enforcing Credit Policy
Examples of Credit Policy
Receivables
Lesson Summary
Quiz 19.1
What Is a Credit Policy?
Terms of Sale
Credit Extension Factors
Collection Policy
Lesson Summary
Quiz 19.2
What Is a Credit Policy?
Considerations
Sales
Possible Negative Impact
Avoiding Issues
Lesson Summary
Quiz 19.3
Offering Credit
The Total Credit Cost Curve
Organizing Credit
Lesson Summary
Quiz 19.4
Offering Credit
Elements to Consider
Lesson Summary
Quiz 19.5
Collections
Collection Policy
Monitoring Receivables
Lesson Summary
Quiz 19.6
Inventory Systems
Systems Defined
Differences
Lesson Summary
Quiz 19.7
Inventory Management
ABC Approach
Economic Order Quantity Model
Derived-Demand Inventories
Lesson Summary
Quiz 19.8
Credit Policy
The One-Shot Approach
The Accounts Receivables Approach
Lesson Summary
Quiz 19.9
Introduction to Foreign Currency Exchange
Law of Demand
Law of Supply
Supply and Demand for Currency
Demand for Currency
Supply for Currency
Demand and Supply Changes
Lesson Summary
Quiz 20.1
Purchasing Power
Parity Theory
Types
Lesson Summary
Quiz 20.2
Background on Foreign Exchange Rates
What Is Interest Rate Parity?
The International Fisher Effect
Interest Arbitrage
Lesson Summary
Quiz 20.3
Background on International Business
The Home Currency Approach
Lesson Summary
Quiz 20.4
International Corporate Finance
Political Risk
Lesson Summary
Quiz 20.5
Exam Instructions
FINAL EXAM
This course provides an introductory survey of the field of finance. It examines the agents, instruments, and institutions that make up the financial system of the modern economy, such as bonds, the stock market, derivatives, and the money market.
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