Instructor - Ryan Williams

 Ryan Williams
 Email: rwilliams83@gsu.edu
 Website: myrobinson.gsu.edu, Ulearn, http://www.ryanwilliams7.com
 Office location: RCB #1217, 12 th floor.
 Office phone: 404-413-7316
 OFFICE HOURS: Mondays at 2:00-4:00 pm or by appointment. (may be late because of traffic).

 Quick summary of syllabus
 Discussion of course
 My expectations
 Math Skills
 Chapter 1 - Introduction
 Chapter 2 – Income Statement and Balance Sheet

 Attendance policy – Department-wide!
On this – you are allowed to miss two weeks of class.
That means only TWO classes.
 I reserve the right to pass the attendance sheet at any point in time.
 Exam 1 – 9/27/2010
 Exam 2 – 11/1/2010
 Final Exam – 12/11/2010 at 3:45-6:15

 Two midterms: 25% each
 One Final Exam: 40%
 Quizzes: 6%
 Resume: 2%
 Problem Set: 2%
 We will have 5 quizzes and I will drop the lowest 2. If you miss a class you will receive a 0% for the quiz.

 Main text: “Lectures in Corporate
Finance”, 5 th ed., by Jayant Kale and
Richard Fendler.
 Optional: 12-week subscription to
The Economist, cheap student rates. Go to http://www.economistacademic.co
m and use Faculty ID code 6105.

 Texas Instruments BA II Plus
 HP also makes a version
 Can use NO calculator with a memory
 We have used calculators available for $20. First come, first serve. Contact Prof. Genna Brown gbrown@gsu.edu

 Split into 3 sections:
 1) Blending Accounting and Finance
 Financial Statements, F.S. Analysis, Fin. Mngt
 2) Valuation from an Investor’s point of view
 Time value of money, valuing stocks, valuing bonds
 3) Valuation from a CFO’s point of view
 Capital Budgeting

 Cellphones OFF – If your phone rings, I get to answer it. (Also true for me).
 No texting. If I see you texting you will be asked to solve a problem on the board.
 I prefer no laptops. However, if you take notes on the laptop, please sit near the back of the classroom so you do not distract students behind you.

 This class is hard, however:
 You may have heard the class requires a lot of math formulas, but everything is based on ONE FORMULA
– not much memorization
 This class rewards thinking, not arithmetic.

Why are you here?

3.
4.
5.
1.
2.
Identify the three main subject areas in finance
Know the different forms of business organization and discuss the agency problem
Define the goal of corporate financial management
Compare/contrast finance and accounting
Understand how cash affects value

 A horrible product (usually) dooms a business.
 A great product is not enough - horrible financial management coupled with a great product (usually) also dooms a business.

 Financial markets and institutions (or Banking) =
Middleman
 Investments = Surplus (they invest money in stock, bonds, and savings accounts)
 Corporate Financial Management (or Corporate Finance)
= Deficit (they take money from investors and buy stuff)

 Sole proprietorship
 Partnership
 Corporation
 Advantages/Disadvantages?

Type Ownership Ability to Raise
Capital
Liability
Sole
Proprietorship
• 100% owned by a single individual
• Owner usually manages company
Partnership Two or more individuals
Difficult Unlimited personal liability
Less difficult than Sole
Proprietorship
Similar to Sole
Proprietorship
Corporation Typical separation of owners and managers
The least difficult of all forms
Limited to owner’s initial investment
Also taxation and liquidity differences

 Getting the agent (the person running the business) to act in the interest of the principal (the shareholders who own the business).

 Maximize value of the firm.
 Same as maximizing stock price.
 NOT the same as “maximizing profits”. Why not?
 She accomplishes this goal by two basic decisions:
How to get money (raise capital), and what to do with it (real investment).

 Accounting USUALLY deals in Book Value (i.e. cost)
 Finance USUALLY deals with Market Value (what someone would pay you for it today).
 Accounting is historical data (annual reports, 10-K filings, etc).
 Finance attempts to project future data – BUT YOU NEED
TO UNDERSTAND ACCOUNTING TO DO THIS

 Value = all future expected cash flows discounted by their riskiness (we will slightly refine this definition later).
 CASH is the only thing that matters here!
 This may seem counterintuitive right now, but should be more clear when we look at Stock Valuation in
Chapter 9.

 After the introductory accounting chapters, this entire class is associated with VALUE.
 Specifically, how to value a bond, a stock, or a new project for a company.

 You owe me:
 Resume, upload picture to MyRobinson
 Prepare for Quiz 1: Introduction, Income Statement and Balance Sheet