Most financing are sourced from internal rather than external sources Most external financing is debt Primary vs. secondary market transactions or offerings Financial intermediaries declining as a source of capital for large firms Securities markets growing in importance
Internal sources, By retention of operating cash, Most common method
External sources, IPO, Primary markets, Secondary markets, Financial market components, Money market, Capital market, Organized Exchanges, Over-the-Counter (OTC)
selecting the best projects in which to invest the firm’s resources
Step 1. identifying potential investments
Step 2. analyzing those investments to identify which will create shareholder value
Step 3. implementing and monitoring the investments selected in step 2
a. Managing daily cash inflows and outflows
b. Forecasting cash balances
c. Building a long-term financial plan
d. Choosing the right mix of debt and equity
Hires and promotes qualified, honest people, and structures employees’ financial incentives to motivate them to maximize firm value
Dimensions of corporate governance, Board of Directors, Securities & Exchange Commission, Sarbanes-Oxley Act of 2002
Identifying, measuring, and managing all types of risk exposures
Some risks are insurable, and some risks can be reduced through diversification.
Financial instruments like forwards, futures, options, and swaps may also be used to hedge market risks such as interest-rate, price, and currency fluctuations.
Create value by managing risks.
Report is consistent and effectively sells its recommendations
Presentation is professionally done
Report is not long, 2000 words max
Final Exam 50%, Bring exam admission slip, Last meeting, Use official exam notebook, Coverage (all focus questions not covered in the discussions)
Case Analysis 50%, Recommendations, Criteria for selecting alternative recommendations are given, Criteria are appropriate, Plan of action is logical linked to the analysis, Plan of action is specific, complete and practical, Recommendations are likely to achieve intended results, Exhibits, Analyses in the exhibits are done correctly, Exhibits support and clarify key points, Not more than 7 exhibits, Quality analysis, Major issues are addressed, Relevant tools are used properly, Assumptions for analysis are stated clearly, Causes of the problems are identified in the analysis