Summary
Summary Corporate Financial Management
- Course
- Institution
Summary corporate financial management including figures
[Show more]
Seller
Follow
marijnedankaart
Content preview
Corporate Financial ManagementFinancial manager tasks:
- Where to invest in
- How to finance it
- How to keep solvency in short term
Goal: maximizing net profits for the shareholders. – Maximize shareholder value, making a
company a cash-generating activity.
Primary market: when a corporation issues security (stocks or bonds), cash flows from
investors to the firm.
Secondary market: where the stocks are traded. Involve the exchange if already issued
securities between investors. Securities may be exchange traded or traded over-the-counter
in a dealer market.
Financial statements provide important information about the economic situation of the
firm.
- Financial statements do not express the risk
- Financial rates generally refer to performance in previous years.
Inflow -> decrease of assets or increase of debt
Outflow -> increase of assets or decrease of debt
Net working capital = current assets – current liabilities
- If positive, then the there is enough cash to pay the next 12 months.
Liquidity – ability to pay back short-term debts in time.
Liquidity ratios – ability to pay back all bills in the short run.
,Current ratio = current assets / current liabilities
- If you have a very high current ratio, you can start investing more, (geld laten liggen
op je rekening is niet goed).
Quick ratio = (current assets – inventories) / current liabilities
Solvency ratios – ability to pay back all debts when the firm stops to exist.
o Equity multiplier = total assets / equity
o Debt equity ratio = liabilities / equity
o Debt ratio = liabilities / total assets
o Times interest earned ratio = EBIT / interest payable
Asset management – Turnover ratios = the ability to use the assets effectively and efficiently.
o Asset turnover ratio = sales / total assets
o Sales per unit of asset
o Inventory turnover = cost of sales / average inventories
o Number of times a year the average inventory is sold
o Days in inventory = 365 / inventory turnover
o Number of days it takes to sell an average inventory.
Profitability ratios
o Return on assets = net income / total assets
o Return on equity = net income / equity
o (net) Profit margin = net income / sales
Market value ratios
o Earnings per share = net income / number of shares
o Price earnings ratio = price per share / earnings per share
o Market to book ratio = market value per share / book value per share
Lecture 2
Future / compound value = investment x 1 + interest rate.
Present / discount value =
Net Present Value:
- To calculate the incremental cost or benefit from adopting an investment.
FV =
Interest rate = or
Present Value =
, Net present value-
Effective annual interest rate / effective annual yield -
Multi-period compounding frequencies -
Compounding an investment m times a year provides end-of-year wealth of:
C0(1+ (r/m))m
C0 is the initial investment
R is the stated annual investment rate
o The stated annual interest rate is the annual interest rate without consideration of
compounding.
Compound every infinitesimal instant:
Perpetuity = A constant stream of cash flows without end
PV = c/r
Growing perpetuity = A constant stream of increasing cash flows without end
PV = C/(r-g)
Annuity = A level stream of regular payments that lasts for a fixed number of periods
Future value of an annuity:
Growing annuity:
Bond = (obligatie) is a certificate showing that a borrower owes a specified sum.
To repay the money, the borrower has agreed to make interest and principal payments on
designated ‘maturity’ dates.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller marijnedankaart. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.78. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
70840 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now