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The first course in Corporate Finance – Session Zero

This is the first course in our series on Finance. Although not essential, knowledge of basic accounting, mathematics and algebra would be quite useful. There are no other pre-requisites.

This course is about cash. As we explain later, when it comes to Finance, it all boils down to cash, cash projections & cash management. Cash is the lifeblood of businesses.

There are three central themes.

  1. What exactly is cash flow and how can you measure it?
  2. How do you determine cash flow for projects, businesses & investment opportunities?
  3. Finally given cash flows for a wide variety of opportunities, on what basis should an investment be made; is there such a thing as good or bad cash flows, or a formal selection and rejection criteria for investment opportunities?

The themes lead to three separate problems.

  1. The valuation problem – how much is a collection of cash flows worth?
  2. The investment problem – how do you decide amongst a range of projects?
  3. The portfolio problem – how do you balance risk amongst a collection of investment choices?

This course uses three case studies to apply these principles & themes. There are seven sessions (0, I, II, III, IV, V, VI) that build up on each other. You can now skip directly to the next section or review the course learning plan below.  If you would like to review the Accounting course before jumping into the core finance course you can also do that first.

Session 0: Learning Objectives

Session 0 broadly identifies the key concepts you are about to study in the course.

Session I: Financial Concepts

At the end of session 1 you should be able to understand:

Concept Title: Definitions

In this section, you will learn and understand:

  • The Operating Cycle
  • The four sub-cycles within the Operating Cycle
  • What are Financial Books and within a financial structure how they relate to a business
  • Liquidity and Maturity

Concept Title: Forms of Ownership

In this section, you will learn:

  • The different forms of ownership and the benefits and drawbacks of each

Concept Title: Financial Statements

In this section you will learn:

  • The general reasons for looking at financial statements.
  • The three major financial statements

Concept Title: Balance Sheet

In this section you will learn:

  • What is a balance sheet
  • What information is provided in it

Concept Title: Income Statement

In this section you will learn:

  • What is an Income Statement
  • What information is provided in it

Concept Title: Statement of Cash Flows

In this section you will learn:

  • What is a statement of cash flow
  • What information is provided on it
  • The type of cash flows

Concept Title: The Accounting Notes

In this section you will learn:

  • What are accounting notes

Session II: Review of Financial Statements

At the end of session 2 you should be able to understand:

Concept Title: Assets

In this section you will learn:

  • What is an asset
  • About current assets
  • Types of current assets
  • About Property, Plant and Equipment

Concept Title: Depreciation

In this section you will learn:

  • What is depreciation

Concept Title: Liabilities

In this section you will learn:

  • What is a liability
  • About current liabilities
  • Types of current liabilities
  • About long term liabilities

Concept Title: Net Working Capital

In this section you will learn:

  • How to calculate net working capital
  • What is net working capital
  • What a positive/negative net working capital indicates

Concept Title: Equity

In this section you will learn:

  • What is an equity
  • Types of equity
  • Bankruptcy

Session III: Risk and Return

At the end of session 3 you should be able to understand:

Concept Title: Risk & Reward

In this section you will learn:

  • What the term risk & reward implies

Concept Title: Return

In this section you will learn:

  • What return means
  • Influences on return
  • What is Return on Equity
  • What is Return on Invested Capital
  • What is a payback period

Session IV: Time Value of Money: An Overview

At the end of session 4 you should be able to understand:

Concept Title: Discount Rate

In this section you should know:

  • What compounding means
  • How to calculate compound interest

Concept Title: Time Value of Money

In this section you should learn:

  • What discounting means
  • What is present value
  • What is future value

Concept Title: Present Value in Action

In this section you should learn:

  • How to calculate: the discount factors, investment stream, return stream, net present value
  • How to analyze the results

Concept Title: Lower your expected return

In this section you will learn:

  • How to lower your expected return
  • What is IRR

Session V: Opportunity Cost and Cost of Capital

At the end of session 5 you should be able to understand:

Concept Title: Opportunity Cost and Cost of Capital

In this section you will learn:

  • What Opportunity cost is
  • What Cost of Capital is

Concept Title: Weighted Average Cost of Capital

In this section you will learn:

  • What is WACC
  • The simple average calculation
  • Issues affecting interest rate on debt
  • Issues affecting required rate of return

Session VI: Case Study – Electronic Arts

At the end of this case you should be able to use previous financial statements to project ones for future periods. You should also be able to evaluate if the stock of the company is priced appropriately and determine if it is ripe for investment.

Session VII: Key Takeaways

2 thoughts on “The first course in Corporate Finance – Session Zero”

  1. smita shah says:

    Very much eager to learn

  2. Pingback: Corporate Finance Posts Index | Learning Corporate Finance
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