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Managerial Finance

Managerial Finance. MBA 632 P.V. Viswanath Comments for beginning of class Spring 2004. What we will do today (February 11). Go over issues from Feb. 4 Go over problems assigned last week Do Chapter 17 Do cashflow computation and examples with Lifeway Foods, Inc. (LWAY) Discuss Quiz 1

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Managerial Finance

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  1. Managerial Finance MBA 632 P.V. Viswanath Comments for beginning of classSpring 2004

  2. What we will do today (February 11) • Go over issues from Feb. 4 • Go over problems assigned last week • Do Chapter 17 • Do cashflow computation and examples with Lifeway Foods, Inc. (LWAY) • Discuss Quiz 1 • Evaluation P.V. Viswanath

  3. Issues from February 4 • How to follow cashflows from all activities • Time value of assets • Definition and type of cashflows • Other determinants of growth potential • Can I begin to think in finance terms? • Find the values on the statement needed for the equations • How will the cashflows affect a company’s future? • What does the change in net working capital etc. mean to management – is it good or bad? • Why do we need the alternative way of computing cashflows? • Determining accurate market value of a firm • Identity vs. definition P.V. Viswanath

  4. Wishlist from Feb. 4 • Keep door open • Don’t speak so fast; ask students if they understand • Explain the calculations for cashflows • Speed up explanations in class • More problems practiced in class • Can’t you just call on volunteers? Don’t call students randomly; I am trying to write down my notes. • More detailed examples. • Real-life examples • End class early P.V. Viswanath

  5. Quiz 1 • Definitions of terms from Chaps 1, 2, 3, 17 • Computation of cashflow numbers for a firm • Computation of financial ratios for a firm P.V. Viswanath

  6. Issues from March 3 -Slow down  -Write more clearly on the board  -A little hurried. I like the examples but they seem rushed  -Make “revised” PowerPoint lecture notes available earlier than the day of class  -Why is your lecture is quite different from the book. How can I concentrate on preparing for exams? - How to calculate growth rates P.V. Viswanath

  7. Issues to keep in mind • Everything we do in class is related to other things. • When we do present value, you cannot forget financial statements • Since I want to focus on connections, so sometimes I go ahead. That’s why I went on to the issue of risk. • We will revisit things that are not clear; that’s why I solicit your comments. • We will certainly revisit statistics – mean, variance, correlation, etc. P.V. Viswanath

  8. What we will do, today, March 10 • Effective Annual Rate • Valuation of stock P.V. Viswanath

  9. What we will do March 24 • Finish up Chapter 7 and what we need from Chapter 8. • Make sure you do all the assigned problems. There are not a lot of new concepts, so I will focus on doing problems. P.V. Viswanath

  10. Questions from March 10 • Difference between rates • How to solve problems by myself • When would knowing the effective rate be useful? • Post solutions • Issues with quiz • Only one question • Tricky! • Why did we do problems just before quiz? Do it a week before quiz. • Less time on quiz; more time on problems. P.V. Viswanath

  11. Midterm • Covering material on Chaps 2, 3, 4, 5 (limited to what was covered in class), 6 and 17 • Three sections • Definitions • Short Questions • Problems • Chap 4 – Present Value • Chap 3 – Accounting Ratios • Chap 17 – Cashflow computations • Chapter 5 – Valuing Bonds • Valuing Stocks – using only the material that was covered in class P.V. Viswanath

  12. Midterm • Concepts you should know (non-exhaustive) • DuPont Identity • APR and EAR • CAPM – just the basics of the formula • Financial Ratios • Computation of Cashflows • Nominal and Real cashflow and interest rates • Agency Costs and Conflicts of Interests • Bond Pricing • Stock Pricing P.V. Viswanath

  13. Today, March 24 and later • Go over Chapter 5 – Valuing Bonds • Focus on problems • Review sessions on Monday 3/29, Friday 3/26 P.V. Viswanath

  14. Comments from April 14 • Correlation and covariance • Variance and beta as risk measures • Beta and variance estimation • Stick to the book P.V. Viswanath

  15. Plan for April 28 and May 5 • Risk and Return • Overview of Capital Structure – Chap. 13, 14 for terminology • Chap. 15 in class P.V. Viswanath

  16. What we did this term • Focus on concepts and application – usefulness for a manager • Student focus – trying to ensure that the material is understood by students at the right conceptual level • Sensitivity to what students have understood, what they have not understood. • Special extra sessions P.V. Viswanath

  17. What we did this term • Understand what should be the objective of the firm's managers. • Manipulate formulas based on the time value of money. • Interpret the firm's financial statements • Use cash flow information to evaluate a firm/project. • Use financial statement information to value stocks and bonds • Decide how to finance a firm on a basic level. P.V. Viswanath

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