8/2/2019 Corporate Finance First Course Toc

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CORPORATEFINANCE-FIRST

COURSE

ByJawwadAhmedFarid

8/2/2019 Corporate Finance First Course Toc

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C O R P O R A T E F I N A N C E : F I R S T C O U R S E

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CONTENTS

SESSIONZEROLEARNINGOBJECTIVES......................................................................................................5

SESSIONIFINANCIALCONCEPTS.............................................................................................................9

1. Definitions..........................................................................................................................................9

i. OperatingCycle..............................................................................................................................9ii. Books.............................................................................................................................................9

iii. Liquidity.......................................................................................................................................9

iv. FinancialStructure.......................................................................................................................9

v. Maturity........................................................................................................................................9

2. FormsofOwnership...........................................................................................................................10

i. SoleProprietor.............................................................................................................................10

ii. Partnerships................................................................................................................................10

iii. Corporations..............................................................................................................................11

iv. LimitedLiabilityCompanies(LLC's)............................................................................................11

3. FinancialStatements..........................................................................................................................12

4. TheBalanceSheet..............................................................................................................................12

5. TheIncomeStatement.......................................................................................................................13

6. StatementofCashFlows....................................................................................................................13

7. TheAccountingNotes........................................................................................................................14

SESSIONIIREVIEWOFFINANCIALSTATEMENTS.........................................................................................15

1. Assets.................................................................................................................................................15

i. Currentassets..............................................................................................................................15

ii. PropertyPlant&Equipment.......................................................................................................16

2.Depreciation..........................................................................................................................................173.Liabilities................................................................................................................................................18

i. CurrentLiabilities.........................................................................................................................18

ii. LongTermLiabilities...................................................................................................................19

4.Networkingcapital...............................................................................................................................19

5.Equity.....................................................................................................................................................19

i. Shares...........................................................................................................................................20

ii. AuthorizedShares.......................................................................................................................20

iii. IssuedShares.............................................................................................................................20

iv. TreasuryShares.......................................................................................................................... 20

v. PreferredShares.........................................................................................................................20vi. CommonStock...........................................................................................................................20

vii. RetainedEarning.......................................................................................................................20

ix. Bankruptcy.................................................................................................................................20

6.IncomeStatement.................................................................................................................................21

SESSION3RISKANDRETURN.................................................................................................................23

1. Risk&Reward....................................................................................................................................23

i. ImportantPointstoremember....................................................................................................24

2.Return....................................................................................................................................................24

i. ReturnonEquity..........................................................................................................................25

ii. ReturnonInvestedCapital&ROE..............................................................................................25

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C O R P O R A T E F I N A N C E : F I R S T C O U R S E

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iii. Paybackperiod..........................................................................................................................26

SESSIONIVTIMEVALUEOFMONEY:ANOVERVIEW...................................................................................27

1. DiscountRate.....................................................................................................................................27

i. Compounding...............................................................................................................................27

2. TimeValueofMoney.........................................................................................................................28

i. Examples......................................................................................................................................31

3. PresentValueinAction......................................................................................................................34

4. InternalRateofReturn(IRR)..............................................................................................................35

i. InternalRateofReturn(IRR)andcomments...............................................................................36

SESSIONVOPPORTUNITYCOSTANDCOSTOFCAPITAL................................................................................42

1. OpportunityCost&CostofCapital....................................................................................................42

i. Scenario1UnderstandingOpportunityCost............................................................................42

ii. Scenario2UnderstandingCostofCapital................................................................................42

2. WeightedAverageCostofCapital(WACC)........................................................................................43

SESSIONVICASESTUDY:ELECTRONICARTS..............................................................................................471. CaseStudy..........................................................................................................................................47

2. Exhibits...............................................................................................................................................69

APPENDIXA.........................................................................................................................................71

DISCLAIMER..........................................................................................................................................72