Corporate Finance: Business Topics 1: 24HourAnswers Tutorials

Hi everyone. Welcome to the first class in the series of online episodes called introduction to corporate
finance by 24houranswers. In this series I'll show the basics of
corporate finance so it's not important whether you have
any knowledge related because I will explain everything in details.
Classes will be consisted mostly of presentations and exercises and I won't bother you much with theory,
but there are certain parts which I consider to be the essense of finance that I'll have to talk about
little longer. Let's go to the syllabus now. Basically as you can see we will start
with brief introduction where I will tell you more about
corporate finance and how it emerged. Later we'll go on with financial
analysis and financial ratios that are very important if you want to
invest in any company if you want to purchase
stocks, bonds of some company etc. you have
to know it's liquidity, solvency efficiency and whether it's
profitable to invest in the company whether you're
an individual or other company. We will go

Some would say advanced stuff in finance business and financial
risk and leverage its not so advanced, but it's important
for you to know when to be familiar with it know how to use funds that you borrow how to loan the
money and how much a company can loan. For
example one day lots of you will be CFO's and the basically this if this is a something this is the basic thing that you
have to know about about money when you're loaning actually from a bank
or from other financial institution. Current assets
management includes cash flow management, inventory
management and other things.

We will go through some theories in inventory management. As you all
know lots of production is going on in China currently but lot's of you will be chairmen of
other companies so you have to know inventory management and how to
evaluate everything in production. Plan and
evaluation of investments.. lots of analyses internal rate of
return, net present value analysis et
cetera. basically whenever you want to invest company's money and if you have three or
four projects as you any company has available then you have to decide which one where to
invest their so whether to who purchase a new assembly
line not to purchase an assembly line so this is very these are very important
information for you.

Sources of financing and cost of capital. This is truly an advanced matter Here I'll need your total
concentration and I would like only advanced students to
attend these classes so if you're not interested in the ways of borrowing capital, borrowing
money like stocks, bonds, preffered stocks how many of which to borrow then you don't
have to attend these classes. Interdependence of yield and risk on security, also very advanced things so if are not interested in that if you
feel that you don't need those things then you are free to listen to the first
chapters of this class. Let's start with the introduction. Corporate finance as a discipline
developed in 1920 after world war 1 largely contributed by
the emergence of finantional institutions, enhance of financial
instruments and financial practice. This period is
marked by the development of public limited companies and increased
interest of stockholders and financial
institutions or company's results. Back then the subject of interest was
passive the the right side over the balance
sheet which is that approach is called traditional
approach. It's been criticized many times it's obvious for observing the finance
from perpective of investment banks and gave much less a passion to use of

It's basically true the passive is important, but if you borrow so much money and if you can borrow much
money it's rather more important what you'll
do with it. The approach was dedicating too much atention too rare problems
like consolidation, reorganization and long-term financial instruments while the short term or neglected. During nineteen fifties after the second
world war a modern approach has developed guided but a large technological
advancement and market competition. The approach emphasizes a growing importance of
managers especially their responsibility towards stockholders for capital, government for
taxes, employees who expect regular salaries
and at last for themselves. Basically as you all know managers are very
important, but in this period owners realized how much they need management to govern their
companies, but managers couldn't do that by
themselves they called science for help and lots of new
quantitative methods have been invented and implemented for making
financial and investment decisions. After world war two lots of those methods came through like a mathematics helped
to managers a lot with creating lots of techniques to assure companies grow and emerge in much larger number.

As presented a modern
approach pays a lot of attention to the way
company use their assets ie it's taking into consideration both active and passive
which is the main advantage in comparison to the traditional approach. As you can see the modern approach also realizes the importance of active
and answers 3 important questions: what sortt of assets company has to
acquire, what should be the total value of assets and how would it be financed? These three questions are essential for corporate finance this is what corporate
farms really does. In order to answer these
questions it has to define basic financial goals, to have good information bases and
to consider the concept cost of capital. In the
end of the twentieth century and in the beginning of the 21st
century there has been a great development of
communications technology and computers as a key influencers for globalization as well as the growth on financial
services like consulting, determination of credit rating, evaluation of the
company determination of securities values et

As you all know twentieth
century 21st century in the beginning was
very dynamic in terms of technology and
globalization is taking over so it's really important to
realize that lots of companies now have the ability to outsource their
production to China to India to countries where costs per worker are lower and communication is so advanced that today
it's literally free to speak to anyone in the whole
world. Methods that arose as a result of
constant improvement in corporate finance are first of all performance measures market value added and economic value
added also one of the most important
characteristic is the ability of companies to create
financial derivatives and methods for managing risk of
investments like capital asset pricing model an arbitrage pricing model. We will speak this is what I was talking
about earlier that we will speak about those advanced theories and capital asset pricing model and arbitrage
pricing model are those.

Now you can see a graph and a place of corporate finance ie financial management as a part of total Finance Group let's say like that. So here you have public finance, Federation, governments and
municipalities, taxes non-profit goals, but every part of finance uses almost a similar mathematical methods like for example if you have more projects to evaluate
and you can only pursue one, use same methods
in Public Finance you know like nonprofit organizations as you would
in corporate finance. Here you have international finance, institutional finance, banks, insurance
companies.. Banks have their own methods of evaluation of risk and they're developing their own mathematical formulas and computer programs for doing that as well
as insurance companies. We'll also be doing on this course a little bitt about securities and investment analysis.

We will speak about yield the risk of
transactions of securities and I hope you'll find that interesting. But the main thing that will do in this course corporate finance and its necissity of measures. As I said before those three questions that corporate
bonds gives answer to are here so financial problems of each company
search for a low-cost sources of capital and search for profitable business
activities. This is our field. We will talk about this the most. Thank you for your attention. I hope you
liked the first video I would like to see you in the next


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