Post on 26-Dec-2015
transcript
THE FOUNDATIONS OF CORPORATE FINANCE:
INTRODUCTION TO THE FINANCIAL STATEMENTS
Lesson 1
Castellanza,21st September, 2011
Corporate Finance
Corporate Finance
The foundations of Corporate Finance: role and objective
What is Corporate Finance
The Financial Division in a company
Who is the Financial Manager
Financial Decision making
The objective function
The tools of Corporate Finance
Corporate Finance
What is Corporate Finance
Corporate Finance concerns the financing of
enterprises - that is, unique combination of
physical and human capital – and the investing
of financial resources.
Core of Corporate Finance: 3 principles
financing
investment
dividends
Corporate Finance
The Financial Manager stands between the firm’s operations and
the financial markets, where investors hold the financial
assets issued by the firm.
Firm’s operations Financial Managers Financial Markets
(Real assets) (Financ. Assets)
Chief Financial Officer (CFO): Treasurer / Controller
Treasurer: cash management/raising capital/banking
relationships
Controller: preparation of financial statements / accounting
/taxes
The Financial Manager
Corporate Finance
Financial decisions:
ordinary short term cash / working capital
medium-long term financing / investing
extraordinary floatation / M&A, …
maximize the value of the firm
but value for who?
stockholders firm
Financial Decision making
Corporate Finance
6
The classical objective function
Corporate Finance
The real world
Corporate Finance
8
The real world
Corporate Finance
The tools of Corporate Finance
Financial Statements
Time value of money
Valuation of companies
Corporate Finance
Introduction to the Financial Statements
Objective: to maximize the value of the firm
How can we check the objective?
financial analysis(financial anlysts, investment banks, …)
technical fundamental
candlestick, … Financial Statements
static dynamicratios analysis flows
analysis
Corporate Finance
Static financial analysis (ratio analysis)
picture of the financial position of the firm at a point in time
Dynamic financial analysis (flows analysis)
changes in year and why
Introduction to Financial Statements: tools
Corporate Finance
Introduction to Financial Statements
Static Analysis Dynamic Analysis
FlowsFlows
Flows from operations
Flows from investment and financing
Ratios
Corporate Finance
Introduction to Financial Statements
Static Analysis
Dynamic Analysis
Assets = Liabilities
Uses of funds = Sources of funds
Corporate Finance
Introduction to Financial Statements:the balance sheet
Fixed Assets
Financial Assets
Current Assets
Intangible Assets
LT fin. Debt
Other LT liabil. (ex. provisions)
Current Liabilit.
EquityNon
Cur
rent
Non C
urrent
Corporate Finance
Introduction to Financial Statements:the balance sheet
Fixed Assets
Financial Assets
Net Working Cap.
Intangible Assets
LT fin. Debt
Other LT obligat. (ex. provisions)
Equity
Corporate Finance
Introduction to Financial Statements: Net Working Capital
Accounts receivable
Inventories
Accounts payable
NWC
Cash and Marketable securities
Other current assets
Other current liabil. (ex: accrued income taxes)
Financ. s. term loans
Corporate Finance
Introduction to Financial Statements: Net Working Capital (operating or non cash)
Accounts receivable
Inventories
Accounts payable
NWC op.
Other current assets
Other current liabil.
Non
cas
h cu
rren
t ass
ets
Non cash current liabilities
Corporate Finance
18
Introduction to Financial Statements:the balance sheet
Non curr. Assets
(fixed, intang., fin.)
Other LT assets and liabil.
NWC NFP.
Equity
Corporate Finance
Introduction to Financial Statements:the income statement (Profit and Loss)
Sales- Operating expenses= EBITDA- Depreciation and Amortization= EBIT- Financial expenses/revenues- Extraordinary items= EBT- Taxes= Net Earning
Corporate Finance
Ex. Prepare a balance sheet for ABC co. from the following information. What is the equity?
Bank loans short term of 200Cash of 100Inventory of 800Building and fixtures of 1500Accounts receivable of 1200Mortgage loan of 1300
Corporate Finance
Ex. Prepare a balance sheet financial reclassification using the following data
Short-term Financial Debt 55,062Cash 40,419Long-Term financial debt 93,832Accounts receivable 80,214Other current liabilities 33,016Inventories 41,156Other current assets 31,660Employees' Termination Pay 14,087Equity 98,186Financial Assets 5,281Fixed Assets 67,893Intangible Assets 66,114Allowance for doubtful receivable accounts 2,519Marketable Securities 14,039Trade accounts payable 50,074