7-2-2022 Finance - Theory
Samenvatting Powerpoints – Finance &
Control – Hoofdfase 3 - 2021/2022
Nick Hildebrand
HOGESCHOOL UTRECHT – FINANCE & CONTROL –
HOOFDFASE 3 – FINANCE THEORY – 2021/2022
,Inhoud
1. Corporate Finance and the Financial Manager ............................................................... 3
1.2 The Four Types of Firms ......................................................................................... 3
1.3 The Financial Manager............................................................................................ 3
1.4 The Financial Manager’s Place in the Corporation .................................................. 3
1.5 The Stock Market .................................................................................................... 4
1.6 Financial Institutions * ............................................................................................. 5
2. Introduction to Financial Statements Analysis ................................................................ 6
2.1 Firms’ Disclosure of Financial Information ............................................................... 6
2.2 The Balance Sheet .................................................................................................. 6
2.3 The Income Statement ............................................................................................ 7
2.4 The Statement of Cash Flows ................................................................................. 8
2.5 Other Financial Statement Information .................................................................... 8
2.6 Financial Statement Analysis .................................................................................. 9
4. Time Value of Money: Valuing Cash Flow Streams .......................................................12
4.1 Valuing a Stream of Cash Flows ............................................................................12
4.2 Perpetuities ............................................................................................................12
4.3 Annuities ................................................................................................................12
4.4 Growing Cash Flows ..............................................................................................13
5. Interest Rates ................................................................................................................14
6. Bonds ............................................................................................................................15
6.1 Bond Terminology ..................................................................................................15
6.2 Zero-Coupon Bonds ...............................................................................................16
6.3 Coupon Bonds .......................................................................................................16
6.5 Corporate Bonds ....................................................................................................17
7 Stock Valuation .............................................................................................................18
8. Investment Decision Rules ............................................................................................19
8.1 The NPV Decision Rule ..........................................................................................19
8.2 Using the NPV Rule ...............................................................................................19
8.3 Alternatives Decision Rules ....................................................................................19
8.4 Choosing Among Projects ......................................................................................20
8.5 Evaluating Projects with Different Lives ..................................................................20
8.6 Choosing Among Projects When Resources Are Limited .......................................20
Dus… Hoofdstuk 8 gaat over ............................................................................................20
9. Fundamentals of Capital Budgeting ...............................................................................21
9.1 The Capital Budgeting Process ..............................................................................21
9.2 Forecasting Incremental Earnings ..........................................................................21
9.3 Determining Incremental Free Cash Flow ..............................................................22
9.4 Other effects on incremental Free Cash Flow.........................................................23
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Finance Theory - Samenvatting Powerpoints - Nick Hildebrand - 2021/2022
, 9.5 Analyzing the Project?............................................................................................23
9.6 Real Options in Capital Budgeting? ........................................................................24
Dus… Hoofdstuk 9 gaat over ............................................................................................24
18. Financial Modeling and Pro Forma Analysis ..............................................................25
18.1 Goals of Long-Term Financial Planning..................................................................25
18.2 Forecasting Financial Statements: The Percent of Sales Method ...........................25
18.3 Forecasting a Planned Expansion ..........................................................................26
18.4 Growth and Firm Value (overslaan voor tentamen) ................................................26
18.5 Valuing the Expansion............................................................................................27
19. Working Capital Management ....................................................................................28
19.1 Overview of Working Capital ..................................................................................28
19.2 Trade Credit ...........................................................................................................28
19.3 Receivables Management ......................................................................................28
19.4 Payables Management...........................................................................................29
19.5 Inventory Management ...........................................................................................29
20. Short-Term Financial Planning ...................................................................................30
23. International Corporate Finance .................................................................................31
23.1 Foreign Exchange ..................................................................................................31
23.2 Exchange Rate Risk ...............................................................................................31
23.3 Internationally Integrated Capital Markets ..............................................................32
23.4 Valuation of Foreign Currency Cash Flows ............................................................32
23.5 Valuation and International Taxation ......................................................................32
23.6 Internationally Segmented Capital Markets ............................................................32
23.7 Capital Budgeting with Exchange Rate Risk ...........................................................32
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Finance Theory - Samenvatting Powerpoints - Nick Hildebrand - 2021/2022
, 1. Corporate Finance and the Financial Manager
1.2 The Four Types of Firms
1. Sole Proprietorships;
2. Partnerships;
3. Limited Liability Companies (LLC);
4. Corporations.
Begrippen boek
• Sole Proprietorship – A business owned and run by one person;
• Partnership – A business owned and run by more than one owner;
• Limited partnership – A partnership with two kinds of owners: general partners and
limited partners;
• Limited liability – When an investor’s liability is limited to her investment;
• Limited liability company (LLC) – A limited partnership without a general partner;
• Corporation – A legally defined, artificial being, separate from its owners;
• Stock – The ownership or equity of a corporation divided into shares;
• Equity – The collection of all the outstanding shares of a corporation;
• Shareholder (also stockholder or equity holder) – An owner of a share of stock in
a corporation;
• Dividend payments – Payments made at the discretion of the corporation to its
equity holders;
• S Corporations – Those corporations that elect subchapter S tax treatment and are
exempted by the U.S. Internal Revenue Service’s tax code from double taxation;
• C Corporations – Corporations that have no restrictions on who owns their shares or
the number of shareholders; they cannot qualify for subchapter S tax treatment and
are subject to direct taxation.
1.3 The Financial Manager
Het doel van een financieel manager:
• Het maximaliseren van de ‘gezondheid’ van het bedrijf, de eigenaars -> de
aandeelhouders (stockholders);
• Corporate Social Responsibility -> stakeholders.
1.4 The Financial Manager’s Place in the Corporation
Ethiek en prikkels in organisaties
• Agency problems – Wanneer managers hun eigen belang boven het belang van de
aandeelhouders stellen.
Begrippen boek
• Board of directors – A group of people elected by shareholders who have the
ultimate decision-making authority in the corporation;
• Chief executive officer (CEO) – The person charged with running the corporation
by instituting the rules and policies set by the board of directors;
• Agency problem – When managers, despite being hired as the agents of
shareholders, put their self-interest ahead of the interests of those shareholders;
• Hostile takeover – A situation in which an individual or organization – sometimes
referred to as a corporate raider – purchases a large fraction of a company’s stock
and in doing so gets enough votes to replace the board of directors and its CEO.
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Finance Theory - Samenvatting Powerpoints - Nick Hildebrand - 2021/2022
,1.5 The Stock Market
Organisaties kunnen zowel een Besloten Vennootschap (bv) of een Naamloze
Vennootschap (nv) zijn. In de USA is dit een Private Corporation of een Public Corporation.
• Private corporation (bv) – Gelimiteerd aantal eigenaren en er is geen
georganiseerde markt voor aandelen;
• Public corporation (nv) – Veel eigenaren en de handel van aandelen is
georganiseerd op de aandelenmarkt (beursgenoteerde ondernemingen);
Er zijn Primary en Secondary aandelenmarkten. Op een primaire aandelenmarkt wordt een
aandeel als eerste verhandeld op moment van uitgave. Op de secundaire aandelenmarkt
worden aandelen onderling verhandeld.
Aandelen worden verhandeld onder de Bid-Ask Spread (Bied- en Laatkoers).
Andere financiële markten:
• Obligatiemarkt (Bond Market);
• Vreemde valutamarkt (Foreign Exchange Market);
• Goederenmarkt (Commodities Market);
• Afgeleide effectenmarkt (Derivative Securities).
Begrippen boek
• Stock market (also stock exchange or bourse) –
Organized market on which the shares of many
corporations are traded;
• Liquid – Describes an investment that can be easily turned
into cash because it can be sold immediately at a
competitive market price;
• Primary market – When a corporation issues new shares
of stock and sells them to investors;
• Secondary market – Markets, such as NYSE or NASDAQ, where shares of a
corporation are traded between investors without the involvement of the corporation;
• Market makers – Individuals or companies at an exchange who match buyers with
sellers;
• Specialists – Market makers at the NYSE;
• Bid price – The price at which a market maker is willing to buy a security;
• Ask price – The price at which a market maker is willing to sell a security;
• Liquidity – Extent to which the market for an asset is liquid, meaning that assets can
be easily turned into cash because they can be sold immediately at competitive
market prices;
• Bid-ask spread – The amount by which the ask price exceeds the bid price;
• Transaction cost – In most markets, an expense such as a broker commission and
the bid-ask spread investors must pay in order to trade securities;
• Limit order – Order to buy or sell a set amount of a security at a fixed price;
• Limit order book – Collection of all current limit orders for a given security;
• Market orders – Orders to trade immediately at the best outstanding limit order
available;
• High frequency traders (HFTs) – Traders who place, update, cancel and execute
trades many times per second;
• Dark pools – Trading venues in which the size and price of orders are not disclosed
to participants. Prices are within the best bid and ask prices available in public
markets, but traders face the risk their orders may not be filled if an excess of either
buy or sell orders is received;
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Finance Theory - Samenvatting Powerpoints - Nick Hildebrand - 2021/2022
, • Listing standards – Outlines of the requirements a company must meet to be traded
on the exchange.
1.6 Financial Institutions *
Verschillende types financiële instituten:
• Banks and Credit Unions;
• Insurance Companies;
• Mutual Funds;
• Pension Funds;
• Hedge Funds;
• Venture Capital Funds;
• Private Equity Funds.
* 1.6 niet heel belangrijk voor het tentamen volgens Annette
Begrippen boek
• Financial institutions – Entities that provide financial services, such as taking
deposits, managing investments, brokering financial transactions, or making loans.
De samenvatting/tabel op pagina 52, 53 en 54 nog eens doorlezen!
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Finance Theory - Samenvatting Powerpoints - Nick Hildebrand - 2021/2022
, 2. Introduction to Financial Statements Analysis
2.1 Firms’ Disclosure of Financial Information
Financial Statements:
• Balans, Verlies- & Winstrekening, Cash Flow-overzicht;
• Vertrouwbare informatie over de organisatie (zeker voor aandeelhouders);
• Verplicht.
Alle bedrijven in de Europese Unie zijn verplicht om te rapporteren aan de hand van IFRS
(International Financial Reporting Standards). Dit is handig om bijvoorbeeld bedrijven te
vergelijken.
Voorbeeld tussen marktwaarde en boekwaarde
Problem
• Global has 3.6 mln shares outstanding, and these shares are trading for a price of
$10.00 per share, what is Global’s market capitalization?
• How does the market capitalization compare to Global’s book value of equity?
Market capitalization = 3,6 mln uitstaande aandelen * $10 = Equity value = $36 mln
Boekwaarde eigen vermogen = $22,2 mln (zie de balans)
Dit betekent dat aandeelhouders bereid zijn om meer te betalen dan het bedrijf (volgens de
boekwaarde) waard is. De verwachting van aandeelhouders zal dan ook zijn dat het bedrijf in
de toekomst qua waarde zal stijgen.
Begrippen Boek
• Financial statements – Accounting reports issued by a firm quarterly and/or annually
that present past performance information and a snapshot of the firm’s assets and the
financing of those assets;
• Annual report (10-k) – The yearly summary of business, accompanying or including
financial statements, sent by U.S. public companies to their shareholders;
• Generally Accepted Accounting Principles (GAAP) – A common set of rules and a
standard format for public companies to use when they prepare their financial reports;
• Auditor (accountant) – A neutral third party, which corporations are required to hire,
that checks a firm’s annual financial statements to ensure they are prepared
according to GAAP, and provides evidence to support the reliability of the information.
Every public company is required to produce four financial statements: the balance sheet,
the income statement, the statement of cash flows and the statement of stockholders’ equity.
2.2 The Balance Sheet
𝑴𝒂𝒓𝒌𝒆𝒕 𝒕𝒐 𝑩𝒐𝒐𝒌 𝑹𝒂𝒕𝒊𝒐 = 𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 / 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦
Sometimes used to classify firms as value stocks (= waardeaandelen) (low M/B) or growth
stocks (= groeiaandelen) (high M/B).
𝑬𝒏𝒕𝒆𝒓𝒑𝒓𝒊𝒔𝒆 𝑽𝒂𝒍𝒖𝒆 (= 𝒐𝒏𝒅𝒆𝒓𝒏𝒆𝒎𝒊𝒏𝒈𝒔𝒘𝒂𝒂𝒓𝒅𝒆)
= 𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒 (𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦) + 𝐷𝑒𝑏𝑡 – 𝐶𝑎𝑠ℎ
* Debt – Cash = Net Debt
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Finance Theory - Samenvatting Powerpoints - Nick Hildebrand - 2021/2022
, Begrippen Boek
• Balance sheet (or statement of financial position) – A list of firm’s assets and
liabilities that provides a snapshot of the firm’s financial position at a given point in
time;
• Assets – The cash, inventory, property, plant and equipment, and other investments
a company has made;
• Liabilities – A firm’s obligations to its creditors;
• Shareholders’ equity, stockholders’ equity – An accounting measure of a firm’s
net worth that represents the difference between the firm’s assets and its liabilities;
• Common stock and paid-in surplus – The amount that stockholders have directly
invested in the firm through purchasing stock from the company;
• Retained Earnings – Profits made by the firm, but retained within the firm and
reinvested in assets or held as cash;
• Current assets – Cash or assets that can be converted into cash within one year;
• Marketable securities – Short-term, low-risk investments that can be easily sold and
converted to cash;
• Accounts receivable – Amounts owed to a firm by customers who have purchased
goods or services on credit;
• Inventories – A firm’s raw materials as well as its work-in-progress and finished
goods;
• Long-term assets – Assets that produce tangible benefits for more than one year;
• Depreciation – A yearly deduction a firm makes form the value of its fixed assets
(other than land) over time, according to a depreciation schedule that depends on an
asset’s life span;
• Book value – The acquisition cost of an asset less its accumulated depreciation;
• Current liabilities – Liabilities that will be satisfied within one year;
• Accounts payable – The amounts owed to creditors for products or services
purchased with credit;
• Notes payable, short-term debt – Loans that must be repaid in the next year;
• Net working capital – The difference between a firm’s current assets and current
liabilities that represents the capital available in the short term to run the business;
• Long-term debt – Any loan or debt obligation with a maturity of more than a year;
• Book value of equity – The difference between the book value of a firm’s assets and
its liabilities; also called shareholders’ equity and stockholders’ equity, it represents
the net worth of a firm form an accounting perspective;
• Liquidation value – The value of a firm after its assets are sold and liabilities paid;
• Market capitalization – The total market value of equity; equals the market price per
share times the number of shares;
• Market-to-book ratio (price-to-book (P/B ratio)) – The ratio of a firm’s market
(equity) capitalization to the book value of its stockholders’ equity;
• Value stocks (waardeaandelen) – Firms with low market-to-book ratios;
• Growth stocks (groeiaandelen) – Firms with high market-to-book ratios;
• Enterprise value (ondernemingswaarde) – The total market value of a firm’s equity
and debt, less the value of its cash and marketable securities. It measures the value
of the firm’s underlying business.
𝑁𝑒𝑡 𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 – 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
2.3 The Income Statement
𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝒑𝒆𝒓 𝑺𝒉𝒂𝒓𝒆 (𝑬𝑷𝑺) = 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 / 𝑆ℎ𝑎𝑟𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
Video vanaf minuut 12 nog eens bekijken voor extra uitleg over de Cash Flow Statement!
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Finance Theory - Samenvatting Powerpoints - Nick Hildebrand - 2021/2022
