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Introduction to business: finance

1247d0fbb1983f2e8070809bb7acd6ef?s=47 Ted Major
February 23, 2016

Introduction to business: finance

CC-BY-SA

1247d0fbb1983f2e8070809bb7acd6ef?s=128

Ted Major

February 23, 2016
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  1. Finance: Acquiring & using funds cc licensed ( BY NC

    ND ) flickr photo by photog63: http://flic.kr/p/GzRs8
  2. Quiz • Closed book/closed notes • Phones & computers put

    away • You may collaborate with your team • You are responsible for the answers on your quiz • You do not have to choose the same answers as your team
  3. cc licensed ( BY NC ND ) flickr photo by

    tomfs: http://flic.kr/p/8zGd2J
  4. cc licensed ( BY NC ND ) flickr photo by

    Eric E Johnson: http://flic.kr/p/5TCmBJ
  5. cc licensed ( BY NC ND ) flickr photo by

    wallyg: http://flic.kr/p/azCBRS
  6. Pay for it?

  7. Cash?

  8. Loan! (debt)

  9. cc licensed ( BY NC SD ) flickr photo by

    axoplasm: http://flic.kr/p/6wWbD
  10. cc licensed ( BY SD ) flickr photo by salisasaki:

    http://flic.kr/p/6Gx11F
  11. cc licensed ( BY NC SD ) flickr photo by

    drewish: http://flic.kr/p/2UczJ
  12. Pay for it?

  13. Loan?

  14. Cash! (equity)

  15. Risk: probability of bad outcome creative commons licensed (BY-ND) flickr

    photo by GavinLi: https://flic.kr/p/7C7QQV
  16. risk-reward tradeoff • higher return? • higher risk • lower

    return? • lower risk
  17. Remember accounting? organizing, analyzing, and reporting financial information ratio analysis

  18. Liquidity Ratios  current ratio:  current assets current liabilities

     acid-test (quick) ratio:  cash + marketable securities + receivables current liabilities
  19. Debt (Leverage) debt to OE: total liabilities owners’ equity describes

    capital structure
  20. Capital structure • Balance between debt and equity • Generally

    similar within industry • Not always! –BUD: 1.084 –MolsonCoors: .4171 –SABMiller: .5549 –Boston Beer: .0011 • ????
  21. Profitability EPS: net income after taxes number of shares outstanding

    return on sales: net income net sales return on equity: net income after tax owners’ equity
  22. creative commons licensed (BY) flickr photo by StockMonkeys.com: https://flic.kr/p/dxpt8u

  23. leverage creative commons licensed (BY-NC-ND) flickr photo by Martin Whitmore:

    https://flic.kr/p/5LVn8X
  24. Leverage, equal capital Eck-Witty Corp. • Equity: $1,000,000 • Debt:

    $0 • Earnings: $120,000 • ROE: 12% Oze-Mor, Inc. • Equity: $200,000 • Debt: $800,000 • Earnings: $60,000 • ROE: 30%
  25. leverage, equal investment Eck-Witty Corp. • Equity: $1,000,000 • Debt:

    $0 • EBIT: $160,000 • Taxes: $40,000 • Earnings: $120,000 • ROE: 12% Oze-Mor, Inc. • Equity: $1,000,000 • Debt: $4,000,000 • EBIT: $800,000 • Interest: $400,000 • Taxes: $100,000 • Earnings: $300,000 • ROE: 30%
  26. leverage, equal investment Eck-Witty Corp. • Equity: $1,000,000 • Debt:

    $0 • EBIT: $80,000 • Taxes: $20,000 • Earnings: $60,000 • ROE: 6% Oze-Mor, Inc. • Equity: $1,000,000 • Debt: $4,000,000 • EBIT: $400,000 • Interest: $400,000 • Taxes: $0 • Earnings: $0 • ROE: 0%
  27. current assets creative commons licensed (BY-NC-ND) flickr photo by County

    of Dare: https://flic.kr/p/nMo3ui
  28. accounts receivable?

  29. creative commons licensed (BY-SA) flickr photo by 401(K) 2013: https://flic.kr/p/biaNt6

  30. creative commons licensed (BY) flickr photo by Inha Leex Hale:

    https://flic.kr/p/73x1km
  31. Time Value of Money • Dollar today vs dollar tomorrow?

    creative commons licensed (BY-NC-SA) flickr photo by Cathérine: https://flic.kr/p/4wjsVc