What does finance do? Finance answers questions like: How can corporations get money? At what price? Should corporations get money? For what kinds of projects? What is security (like stock) and how should we think of them? What's a derivative(option, and the hot word, CDS? What is some of this stuff in the wS? Finance is a hybrid of Economics(The science of choosing among tradeoffs StatisticsThe science of dealing with uncertainty Accounting(The language of business 2013-2-25 1-10
2013-2-25 1-10 What Does Finance Do? • Finance answers questions like: How can corporations get money? At what price? Should corporations get money? For what kinds of projects? What is security (like stock) and how should we think of them? What’s a derivative (option, and the hot word, CDS)? What is some of this stuff in the WSJ? …… • Finance is a hybrid of: Economics (The science of choosing among tradeoffs) Statistics (The science of dealing with uncertainty) Accounting (The language of business)
Corporate Finance Focus on the flow of cash Between Financial Markets And Firm Operations (2) Firm's Financia Financial (4a) operations manager markets (4b) (1) Cash raised from investors by issuing securities: bond /stock What do you think about the risk of the project? e2 (2)Cash invested in firm: which project should mak (3)Cash generated by operations: the results from the investment decision (4a)Cash reinvested vS (4b )Cash returned to investors vS reinvestment 2013-2-25 Which could create more value to shareholder?
2013-2-25 1-11 Financial manager Firm's operations Financial markets (2) Cash invested in firm: which project should make? What do you think about the risk of the project? (2) (3) Cash generated by operations: the results from the investment decision (3) (4a) Cash reinvested vs. (4b) Cash returned to investors vs. reinvestment: Which could create more value to shareholder? (4a) (4b) Corporate Finance Focus on the Flow of Cash Between Financial Markets And Firm Operations (1) Cash raised from investors by issuing securities: bond / stock (1)