Business Finance

Lecture 1
 Text and Reference
Reference Material
Material
The Primary textbook for the course is
• Essentials of Corporate Finance, by Ross,
Westerfield and Jordan, fourth edition, McGraw
Hill Publishers, ISBN 0-07-121057-7
 Text and Reference
Reference Material
Material
Reference books will be
• Introduction to Finance by Lawrence J. Gitman
and Jeff Madura, Addison-Wesley Publishers
• Foundations of Financial Management by
Stanley B. Block and Geoffrey A. Hirt, McGraw
Hill Publishers
 Course
Course Contents
Contents
• An overview of Financial Environment
• Financial Statements, Taxes and Cash
Flows
• Time Value of Money and Discounted
Cash Flow Valuation
• Valuation of Stocks and Bonds
• Net Present Value and other Investment
Criteria
 Course
Course Contents
Contents
• Capital Investment Decision
• Risk and Return
• Cost of Capital
• Leverage and Capital Structure
• Raising Capital
• Working Capital Management
• Dividends
 Topics
Topics under
under Discussion
Discussion
• Finance
– Components
– Significance
• Role of Financial Manager
 Finance:
Finance: A
A Quick
Quick Look
Look
• Four Basic Areas
1. Business Finance
2. Investments
3. Financial Institutions
4. International Finance
 Business
Business Finance
Finance
Addresses the following three questions:

1. What long-term investments should the firm

engage in?
2. How can the firm raise the money for the
required investments?
3. How much short-term cash flow does a
company need to pay its bills?
 Investments
Investments
• Deals with financial assets such as stocks
and bonds.
• It covers the following issues
– Pricing Financial Assets
– Associated Risks and Rewards
– Determining best mixture of financial
investment
 Investment
Investment
• Career opportunities in investment
– Stock Brokerage
– Portfolio Management
– Security Analysis
 Financial
Financial Institutions
• Businesses dealing in financial matters
– Banks and Insurance companies
 International
International Finance
Finance
• Covers international aspects of corporate
finance, investment and financial
institutions.
 Summary
Summary
• Finance: Four Basic Areas
1. Business Finance
2. Investment
3. Financial Institutions
4. International Finance
 Upcoming
Upcoming Topics
Topics
• Why Study Finance
• Role of Financial Manager
• Forms of Business Organization
– Proprietorship
– Partnership
– Corporation
• Goals of the Corporate Firm
• Agency Problem
• Firm and the Financial Markets