Corporate Finance
Inhoudsopgave
Hoorcolleges .......................................................................................................................................................... 2
Hoorcollege 1 ..................................................................................................................................................... 2
Hoorcollege 2 ..................................................................................................................................................... 4
Tutorial 1............................................................................................................................................................ 8
Hoorcollege 3 ................................................................................................................................................... 10
Hoorcollege 4 ................................................................................................................................................... 15
Tutorial 2.......................................................................................................................................................... 19
Hoorcollege 5 ................................................................................................................................................... 23
Hoorcollege 6 ................................................................................................................................................... 26
Tutorial 3.......................................................................................................................................................... 38
Hoorcollege 7 ................................................................................................................................................... 41
Hoorcollege 8 ................................................................................................................................................... 50
Tutorial 4.......................................................................................................................................................... 56
Hoorcollege 9 ................................................................................................................................................... 57
Hoorcollege 10 ................................................................................................................................................. 63
Tutorial 5.......................................................................................................................................................... 70
Hoorcollege 11 ................................................................................................................................................. 74
Hoorcollege 12 ................................................................................................................................................. 78
Tutorial 6.......................................................................................................................................................... 83
Hoorcollege 13 ................................................................................................................................................. 87
Boek ..................................................................................................................................................................... 92
Hoofdstuk 1 ...................................................................................................................................................... 92
Hoofdstuk 2 ...................................................................................................................................................... 92
Hoofdstuk 3 ...................................................................................................................................................... 93
Hoofdstuk 4 ...................................................................................................................................................... 95
Hoofdstuk 5 ...................................................................................................................................................... 95
Hoofdstuk 6 ...................................................................................................................................................... 97
Hoofdstuk 7 ...................................................................................................................................................... 99
Hoofdstuk 11 .................................................................................................................................................... 99
Hoofdstuk 12 .................................................................................................................................................. 100
1
,Hoorcolleges
Hoorcollege 1
Financial decision making is all about the future.
Accounting = records the past and works with real amounts. It comes out of accounting rules.
Finance = discounting the future cashflows and works with forecasts.
What is corporate finance?
• Investment = what long-term investment will you make?
• Financing = where will you get long-term financing for your long-term projects? Right hand
side of the balance sheet.
• Working capital management (liquidity) = how will you manage your everyday activities?
The financial manager
Simplified corporate organization chart
2
,Financial goals are profitability, liquidity, security, and independence. Profitability is the most
important goal. In this way you can maximize the shareholder value.
The goal of financial management is to manage risk, maximize share price and to avoid financial
distress, and with that maximize shareholder (stakeholder) value.
How cash flows
Primary vs secondary markets
Primary markets:
• Securities (assets or equity) are sold to investors
• Money that is raised goes to issuing firm
• First share issue is called an initial public offering
• Second share is called a seasoned offering
Secondary markets:
• Investors trade securities with eachother
• Money that is raised goes to seller of securities
• Share prices
• You do not buy it from the company!
The annual report
1. The statement of financial position
The balance sheet equation: assets =
liabilities + equity
The net wotking capital is the difference
between current assets and current liabilities.
It is important to ensure that net working
capital is positive. Positive net working capital
means that enough cash will be available to
pay off liabilities arising.
3
, Market value versus book value
Book value = based on accounting figures drawn from accounting standards, when you look at
the balance sheet.
Market value = based on prices or market valuations, please always use the market value.
2. The income statement
EBT = earnings before taxes
EBIT = earnings before interest and taxes
EBITD(A) = earnings before interest, taxes, depreciation, and amortization
Taxes
- Average tax rates = percentage of income that is paid in taxes, tax bill divided by your
taxable income.
- Marginal tax rate = the tax you would pay if you earn one more unit of currency.
For project calculations, use the marginal tax rates as that is the rate that would be taxed on
any additional income. If we want to do another project, this will give us additional income,
that is why we use the marginal tax rates.
3. Cash flow statement
Often most important item to take from financial statements! Total cash flow comes from:
operating activities, investing activities and financing activities. Cash flow is not the working
capital. Working capital is a snapshot, cash flow is the earning (ability) over a period of time.
Cash flow is not profit. Depreciation decreases profit but not the cash flow.
Cash flow is the money that we actually receive or pay.
Hoorcollege 2
Ratio analysis
It is important to be able to analyze a firm’s financial statements and compare them to other firms.
We put things in perspective with this ratio analysis. You get a formula sheet with the exam.
Profitability ratios
How much net income do you
generate by a number of sales.
How much money do you
generate out of the total assets
you have.
How much money do you
generate out of your total
equity.
Financial leverage ratio
The fraction of assets we have
in debt.
If you know one of these ratios,
you can calculate the others.
Market value ratios
4
Inhoudsopgave
Hoorcolleges .......................................................................................................................................................... 2
Hoorcollege 1 ..................................................................................................................................................... 2
Hoorcollege 2 ..................................................................................................................................................... 4
Tutorial 1............................................................................................................................................................ 8
Hoorcollege 3 ................................................................................................................................................... 10
Hoorcollege 4 ................................................................................................................................................... 15
Tutorial 2.......................................................................................................................................................... 19
Hoorcollege 5 ................................................................................................................................................... 23
Hoorcollege 6 ................................................................................................................................................... 26
Tutorial 3.......................................................................................................................................................... 38
Hoorcollege 7 ................................................................................................................................................... 41
Hoorcollege 8 ................................................................................................................................................... 50
Tutorial 4.......................................................................................................................................................... 56
Hoorcollege 9 ................................................................................................................................................... 57
Hoorcollege 10 ................................................................................................................................................. 63
Tutorial 5.......................................................................................................................................................... 70
Hoorcollege 11 ................................................................................................................................................. 74
Hoorcollege 12 ................................................................................................................................................. 78
Tutorial 6.......................................................................................................................................................... 83
Hoorcollege 13 ................................................................................................................................................. 87
Boek ..................................................................................................................................................................... 92
Hoofdstuk 1 ...................................................................................................................................................... 92
Hoofdstuk 2 ...................................................................................................................................................... 92
Hoofdstuk 3 ...................................................................................................................................................... 93
Hoofdstuk 4 ...................................................................................................................................................... 95
Hoofdstuk 5 ...................................................................................................................................................... 95
Hoofdstuk 6 ...................................................................................................................................................... 97
Hoofdstuk 7 ...................................................................................................................................................... 99
Hoofdstuk 11 .................................................................................................................................................... 99
Hoofdstuk 12 .................................................................................................................................................. 100
1
,Hoorcolleges
Hoorcollege 1
Financial decision making is all about the future.
Accounting = records the past and works with real amounts. It comes out of accounting rules.
Finance = discounting the future cashflows and works with forecasts.
What is corporate finance?
• Investment = what long-term investment will you make?
• Financing = where will you get long-term financing for your long-term projects? Right hand
side of the balance sheet.
• Working capital management (liquidity) = how will you manage your everyday activities?
The financial manager
Simplified corporate organization chart
2
,Financial goals are profitability, liquidity, security, and independence. Profitability is the most
important goal. In this way you can maximize the shareholder value.
The goal of financial management is to manage risk, maximize share price and to avoid financial
distress, and with that maximize shareholder (stakeholder) value.
How cash flows
Primary vs secondary markets
Primary markets:
• Securities (assets or equity) are sold to investors
• Money that is raised goes to issuing firm
• First share issue is called an initial public offering
• Second share is called a seasoned offering
Secondary markets:
• Investors trade securities with eachother
• Money that is raised goes to seller of securities
• Share prices
• You do not buy it from the company!
The annual report
1. The statement of financial position
The balance sheet equation: assets =
liabilities + equity
The net wotking capital is the difference
between current assets and current liabilities.
It is important to ensure that net working
capital is positive. Positive net working capital
means that enough cash will be available to
pay off liabilities arising.
3
, Market value versus book value
Book value = based on accounting figures drawn from accounting standards, when you look at
the balance sheet.
Market value = based on prices or market valuations, please always use the market value.
2. The income statement
EBT = earnings before taxes
EBIT = earnings before interest and taxes
EBITD(A) = earnings before interest, taxes, depreciation, and amortization
Taxes
- Average tax rates = percentage of income that is paid in taxes, tax bill divided by your
taxable income.
- Marginal tax rate = the tax you would pay if you earn one more unit of currency.
For project calculations, use the marginal tax rates as that is the rate that would be taxed on
any additional income. If we want to do another project, this will give us additional income,
that is why we use the marginal tax rates.
3. Cash flow statement
Often most important item to take from financial statements! Total cash flow comes from:
operating activities, investing activities and financing activities. Cash flow is not the working
capital. Working capital is a snapshot, cash flow is the earning (ability) over a period of time.
Cash flow is not profit. Depreciation decreases profit but not the cash flow.
Cash flow is the money that we actually receive or pay.
Hoorcollege 2
Ratio analysis
It is important to be able to analyze a firm’s financial statements and compare them to other firms.
We put things in perspective with this ratio analysis. You get a formula sheet with the exam.
Profitability ratios
How much net income do you
generate by a number of sales.
How much money do you
generate out of the total assets
you have.
How much money do you
generate out of your total
equity.
Financial leverage ratio
The fraction of assets we have
in debt.
If you know one of these ratios,
you can calculate the others.
Market value ratios
4
