01-02 fin man

• Finance studies how individuals, institutions, governments, and businesses acquire, spend and manage money and other financial assets
• Financial management, also known as corporate finance, focuses on decisions relating to how much and what types of assets to acquire, how to raise the capital needed to purchase assets, and how to run
• Capital markets relate to where interest rates and stock and bond prices are determined. Also studied here are the financial institutions that supply the capital to businesses. Banks, investment banks, stockbrokers, mutual funds, insurance companies, and the like bring together “savers” who have money to invest and businesses, individuals, and other entities that need capital for various purposes.
• Investments


  Decisions concerning stocks and bonds
• Rational investors


  • Want to hold diversified portfolios to limit risks
• Portfolio theory


  Structuring portfolios, or “baskets,” of stocks and bonds in a way that limits risks
• Security analysis


  Finding the proper values of individual securities (stocks and bonds)
• Market analysis


  Determining whether stock and bond markets at any given time are “too high,” “too low,” or “about right”
• Finance prepares students for banking, investments, insurance, corporations, and government jobs. Accounting students need to know other business areas such as marketing, management, and human resources
• Securities, Commodities, and Financial Services Sales Agent


  • Combines a job in sales with a finance background
  • Works with buyers and sellers in financial markets to sell securities, counsel companies, and handle trades
• Financial Analyst


  • Works for a company or a non-profit
  • Helps decision-makers determine an investment strategy for an organization
• Controller


  • Directs a company’s accounting practices
  • Responsibilities include developing profit and loss statements, balance sheets, financial prospectuses, and preparing reports that predict the organization's financial performance
• Finance Director


  • Helps the company manage its financial operations
  • Skills include strategic planning, mergers and acquisitions, forecasting, budgeting, and financial modeling
• Investment Banker


  • Helps an organization raise capital by selling bonds or equity
  • Advises different clients on various financial opportunities depending on the nature of the finance person's business
• Stockbroker


  • Buy and sell securities
  • Operate on behalf of a client
• Financial Examiner


  • Checks if the company complies with laws and regulations governing financial, securities institutions, and financial and real estate transactions
• Trader


  • Works closely with portfolio managers
  • Buys and sells securities based on their requests
• Accountant


  • Manages and interprets financial statements
  • Specialties may include forensic accounting, managerial accounting, public accounting, internal auditing, or government accounting
• Chief Financial Officer (CFO)


  • Leads and manages the overall financial dealings of the company
  • Tracks profit and loss
  • Strategizes how to make the company more profitable
  • Management experience is needed to direct staff on maximizing the company's finances, including various departments or divisions
• Personal Financial Advisor


  • Works with individuals
  • Requires thorough knowledge of taxes, investments, financial planning goals, etc.
• Portfolio Manager


  • Oversees a fund or group of funds
  • Makes investment decisions and tracks trends
• Sole proprietorship


  An unincorporated business owned by one individual
• Corporation is a legal entity separate and distinct from its owners and managers.
• Partnership is a legal arrangement between two (2) or more people who decide to do business together
• Cooperative is a business organization in which the business is owned and controlled by those who use its services.
• public corporations, managers and employees work on behalf of the business's shareholders; therefore, they should pursue policies promoting stockholder value.
• Managerial actions, combined with the economy, taxes, and political conditions, influence the level and riskiness of the company’s future cash flows, which ultimately determine the company’s stock price.
• “True” means investors expect cash flows and risk if they have all of the information about a company.
• “Perceived” means what investors expect, given their limited information
• “Intrinsic Value” means that an estimate of a stock’s “true” value is based on accurate risk and return data. The intrinsic value can be estimated but not measured precisely.
• “Market Price,” the stock value is based on perception but possibly incorrect information as seen by the marginal investor.
• When a stock’s actual market price equals its intrinsic value, it is in equilibrium. When equilibrium exists, there is no pressure for a stock price change. Market prices can—and do—differ from intrinsic values, but eventually, as the future unfolds, the two (2) values tend to converge.
• Actual stock prices are easy to determine and can be found on the Internet.
• intrinsic values are estimates; different analysts with different data and views about the future form different estimates of a stock’s intrinsic value.
• Corporate raiders are individuals who target corporations for takeover because they are undervalued.
• Compensation packages should be sufficient to attract and retain skilled managers, but they should not go beyond what is needed.
• Hostile takeover is the acquisition of a company over the opposition of its management.
• Conflicts can also arise between stockholders and debtholders. Debtholders, which include the company’s bankers and its bondholders, generally receive fixed payments regardless of how well the company does, while stockholders do better when the company does better
• Shareholder Wealth Maximization, the primary financial goal of managers of publicly owned companies, implies that decisions should be made to maximize the long-run value of the firm’s common stock
• Direct transfers of money and securities occur when a business sells its stocks or bonds directly to savers without going through any financial institution. The company delivers its securities to savers, who, in turn, give the firm the money it needs. This procedure is used mainly by small firms, and relatively little capital is raised by direct transfers