University:
York University
Course:
ADMS 2541 | Introduction to Personal Finance
Academic year:

2021
Views:

121

Pages:

3
Author:

Niklas

August 24th Chapter 1 Questions in Finance 1) What are the costs? 2) How do we cover the costs? - How do we fund capital? 3) How much cash can be generated? 4) When will cash be generated? 5) What are the risks? Accounting = current assessment of financial health? Finance = Future projections Areas of Finance 1) Investments - Buy vs Sell - Analyze/value financial investments - Stocks, bonds, derivatives, etc. - Trade assets based on analysis - Portfolio management - Client advice - Mutual funds - Investment banking 2) Financial Institutions - Banks - Credit card companies - Insurance companies 3) International Finance - exchange rates - USD is very strong (euro got cheaper) USD = 1 EUR US Firm: Buy inputs from US or Europe? Sell outputs to US or Europe? - Gas prices - Russia limited exports → lower supply → price ↑ - Russia/Ukraine war → higher demand in oil → price ↑ - Recently, US limited exports for internal consumption → price ↓ 4) Corporate Finance - Financial management of a firm - Capital budgeting - Capital structure - Working capital Easiest Company Firm = Sole Proprietorship Pros - only owner - least regulated - keep all profit - taxed as personal income - limited to length of your life Cons - unlimited liability - difficult to sell Partnership - partners bring in needed capital - multiple owners - two types: ** - general** ** - limited** - limited: doesn't participate + has limited liability - can't sue 8/26 Ch 1 continued CORPORATION - Borrow $ - own property - can sue + be sued VENTURE CAPITALISTS - occurs in early stage - obtain BOD seats - exit strategy IPO = Initial Public Offering - sale of stock from the corporation to public - companies MUST file w/ SEC (Securities Exchange Commission) Stockholders can sell stocks at secondary stock market - primary: corporation owner - secondary: One owner → Another owner Firm A) Firm raises cash at exchange for securities B) Invest in cash assets C) Cash flow from assets D and E Retain/Reinvest Returns to capital Financial Markets Short term debt Long term debt Equity shares Government Pros - limited liability - easily transfer ownership - unlimited life - easier to raise capital Cons - lots of regulations - Securities Act (1933) - regulations when issuing securities - Securities Exchange Act (1934) - Creation of SEC - Sarbanes-Oxley (2002) - Increased reporting - double taxation - Agency problems