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College aantekeningen Corporate Finance (MAN-BCU-V)
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Notes Corporate finance, Radboud University.
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Aantekeningen Hoorcollege ‘Corporate finance’CorpFin@fm.ru.nl
Dr. Dirk-Jan Janssen
Monday: 15.30-16.30 live questions
Tuesday: weekly test (5 in total)
Wednesday: lecture
Thursday: lecture
Friday: tutorial with exercises
Exam: MC questions
Formuleblad krijg je bij het tentamen!
Assets = liabilities + equity
1.04t = 3
Hoeveel is t?
ln(3)/ln (1.04) = 28.01
APR → EAR
r/n en ^n
EAR → APR
^ 1/n
,Hoorcollege 1 (Chapter 1 & 3)
Introduction to Corporate Finance
Chapter 1
Accounting Finance
Records the past Discounting future cash flows
Works with real amounts Works with forecasts
Example: Brand value Coca Cola
Accouting: on the books → 7 bil$
Finance: in the market → 70-80 bil$
What is Corporate Finance?
Investment: What long-term investments will you make?
Capital Budgeting= the process of planning and managing a firm’s long-term investments
(identifying business opportunities)
- Evaluating the size, timing and risk of future cash flows
Financing: Where will you get long-term financing for your long-term projects?
Capital structure= the mixture of long-term debt and equity maintained by a firm
- What percentage goes to creditors and shareholders?
Working Capital Management (Liquidity): How will you manage your everyday (financial)
activities?
Working capital=- a firm’s short-term assets and liabilities
The Financial Manager
,Simplified Corporate Organization Chart
Financial Goals
1. Profitability (1st)
2. Liquidity (2nd)
3. Security → not ultimate goal
4. Independence → not ultimate goal
Most important one: Profitability → nature of the private corporation that wants to make
profit.
You can divide these goals into two classes:
1. Profitability
2. Bankruptcy avoidance
These two classes can contradict each other: safe → profit
You need a goal with both factors.
The goal of Financial Management
- Manage risk
- Maximize share price
- Avoid financial distress
Uiteindelijk: Maximize shareholder (stakeholder) value. Maximize the current value per share
of the existing equity.
, How Cash flows…
The company is an environment, you have to deal with the government. You also have to
deal with investors.
Primary vs. Secondary Markets
Primary market= corporation is the seller and the transaction raises money for the
corporation. Securities are sold to investors.
- Two types:
o Public offerings: selling securities to the general public
o Private placements: a negotiated sale involving a specific buyer
- Initial public offering: first share issue → after that seasoned offering
Secondary markets= one owner or creditor selling to another. Investors trade securities with
each other
- Transferring ownership of corporate securities
- Share prices
- Two kinds:
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