Managerial Finance

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

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 companys 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

4
Wishlist from Feb. 4

• Keep door open
• Dont speak so fast ask students if they
  understand
• Explain the calculations for cashflows
• Speed up explanations in class
• More problems practiced in class
• Cant you just call on volunteers? Dont call
  students randomly I am trying to write down my
  notes.
• More detailed examples.
• Real-life examples
• End class early

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

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

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. Thats why I went on to
  the issue of risk.
• We will revisit things that are not clear thats
  why I solicit your comments.
• We will certainly revisit statistics mean,
  variance, correlation, etc.

8
What we will do, today, March 10

• Effective Annual Rate
• Valuation of stock

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.

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.

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

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

13
Today, March 24 and later

• Go over Chapter 5 Valuing Bonds
• Focus on problems
• Review sessions on Monday 3/29, Friday 3/26

14
Comments from April 14

• Correlation and covariance
• Variance and beta as risk measures
• Beta and variance estimation
• Stick to the book

15
Plan for April 28 and May 5

• Risk and Return
• Overview of Capital Structure Chap. 13, 14 for
  terminology
• Chap. 15 in class

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

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.