Finance: General Concepts and Free Market Economies

Description

Description: This course will introduce you to the fundamentals of corporate finance. It aims to convey a managerial and analytical level understanding on financial topics such as the time value of money, present value, future value, discounted cash flow, annuities, efficient market  hypothesis, security market line, risk & return and portfolio theory.

 This course features dynamic and engaging video with audio narration, infographics and short quizzes to test your knowledge

Background: The field of finance deals with allocation and expenditure of capital, flow of cash and cost of capital. This also covers the capital markets involved in the process and decisions for raising funds at the public level for governments, at the corporate level for companies and at the individual level for consumers.

Sound financial discipline benefits both consumers and investors, in turn improving the whole economic system. In broad terms, finance deals with the following sub-fields:
- Capital Markets
- Financial Institutions
- Investments
- Corporate Finance

Objectives Of Financial Management:
Sometimes the objectives of financial management are misunderstood as being about profit maximization. Profit is a vague measure – it can be after tax profit, before tax profit, earnings before interest and tax (EBIT), or earnings after tax (EAT). Profit includes many non-cash items such as depreciation and amortization and bad debt expense. Profit figures can be manipulated. Also, profit is considered as a short term oriented measure of firm performance. For all these limitations of profit measures, profit maximization is not the objective of financial management.

Shareholders’ wealth maximization is the objective of financial management. The concept of shareholders’ wealth maximization takes into consideration the risk factors associated with financial decisions and the time value of money. The shareholders’ wealth maximization is a long term oriented goal. With shareholders’ wealth maximization objective as the key motivation, financial managers have three key decisions to make:
• What sources will be used to raise funds (debt and equity mix) – a capital structure decision
• Where the money will be invested - a capital budgeting decision
• Managing and maintaining an appropriate mix of working capital – a working capital management decision.