Finance

Finance is one of the most important aspects of business management. Without proper financial planning a new enterprise is unlikely to be successful. Managing money (a liquid asset) is essential to ensure a secure future, both for the individual and an organization.

 

Personal Finance

Personal financial decisions may involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement.

Personal financial decisions may also involve paying for a loan.

Questions in personal finance revolve around:

• How much money will be needed by an individual (or by a family) at various points in the future?

• Where will this money come from (e.g. savings or borrowing)?

• How can people protect themselves against unforeseen events in their lives, and risk in financial markets?

• How can family assets be best transferred across generations (bequests and inheritance)?

• How do taxes (tax subsidies or penalties) affect personal financial decisions?

• How does credit affect an individual's financial standing?

• How can one plan for a secure financial future in an environment of economic instability?

 

Business Finance

Managerial or corporate finance is the task of providing the funds for a corporation's activities. For small business, this is referred to as SME finance. It generally involves balancing risk and profitability, while attempting to maximize an entity's wealth and the value of its stock.

Long term funds are provided by ownership equity and long-term credit, often in the form of bonds. The balance between these forms the company's capital structure. Short-term funding or working capital is mostly provided by banks extending a line of credit.

Another business decision concerning finance is investment, or fund management. An investment is an acquisition of an asset in the hope that it will maintain or increase its value. In investment management – in choosing a portfolio – one has to decide what, how much and when to invest.

 

To do this, a company should:

1. Identify relevant objectives and constraints: institution or individual goals, time horizon, risk aversion and tax considerations;

2. Identify the appropriate strategy: active v. passive – hedging strategy; and

3. Measure the portfolio performance.

 

Financial management is duplicate with the financial function of the accounting profession. However, financial accounting is more concerned with the reporting of historical financial information, while the financial decision is directed toward the future of the firm.

 

Business Finance

• Issue of Securities

• Dividend Policy

• Debt Policy

• Corporate Taxes

• Personal Taxes

• Cost of Financial Distress

• Investment and Financing Decisions

• Corporate Liabilities

• Valuation of Options

• Option Pricing Theory

• Warrants and Convertibles

• Debt Financing

• Project Finance

• Hedging Financial Risk

• Leasing

• Analysis of Financial Performance

• Financial Planning (short-term)

• Credit Management

• Cash Management

• Lending and Borrowing (short-term)

• Lending

• Mergers

• International Financial Management

• Pensions

 

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Investment

An investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future.

In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.

 

Investment

• Financial Instruments
• Financial Markets
• Securities Trading
• Investors and the Investment Process
• Net Present Value
• Capital Budgeting

 

Portfolio Analysis

• Risk and Return
• Efficient Diversification
• Calculating Efficient Frontier
• Correlation of Single-Index Security Returns
• Correlation of Multi-Index Security Returns
• Utility Analysis
• Portfolio Selection Models

 

Equilibrium Models in Capital Markets

• Standard Capital Asset Pricing Model
• Nonstandard Capital Asset Pricing Model
• Arbitrage Pricing Theory
• Empirical Tests of Equilibrium Models

 

Fixed-Income Securities

• Bond Prices and Yields
• Bond Prices and Spot Rates
• Managing Fixed-Income Investments

 

Security Analysis

• Efficient Markets
• Valuation Process
• Earnings Estimation
• Macroeconomic Analysis
• Industry Analysis
• Equity Valuation
• Financial Statement Analysis
• Technical Analysis

 

Derivative Assets

• Options Markets
• Options Valuation
• Options Pricing
• Futures Markets
• Futures Valuation

 

Investment Management

• Evaluation of Portfolio Performance
• Evaluation of Security Analysis
• Stock Portfolio Management
• Bond Portfolio Management
• International Diversification

 

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