Session 1 Slides - Intro to Business Finance
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Transcript of Session 1 Slides - Intro to Business Finance
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8/2/2019 Session 1 Slides - Intro to Business Finance
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Business FinanceGIBS FULL TIME MBA 2011
Andrew Abdo
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MBA Framework
External ReportingFinancial Performance and
Position FinancialStatements
Regulated (IFRS + Audit)
Ratio Analysis
FinancialAccounting
Internal Users (non regulated)
Business processes, internalcontrols, budgeting &forecasting
Allocation of Costs ,Breakeven, Volumes, Pricing
Management
Accounting
Sources of funding Investments
Valuing businesses
Mergers and acquisitions
Financial modelling
Risk and return
BusinessFinance
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BusinessNeedsFundingInvestmentDecisions
Grows
Can be Valued
Business FinanceTools for Strategy & Leadership
1
2
3 4
5 6
Must Plan
2
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Demystify the language of financeSimplify complex conceptsPractical applicationUseful tools for decision making
Financial modelling in Excel
the GOAL
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Assessment
IndividualClass Participation & Prep 10%Class Quiz 10%
SyndicateCase Write-Up Session 4 (Lifestyle) 10%Case Write-Up Session 7 (SportWorld) 10%
Exam 60%
Total 100%
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Prep Cases
Case 1 Disney
Case 2 Clinic Supply Agency
Case 3
Green-X Case 4 Lifestyle(Graded)
Case 5 Heritage Dolls
Case 6 SportWorld (Graded) Case 7 Vodacom
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Cycle of Competitiveness
Profit
Share Price
Cash
Credit Rating
Reinvest inCompany
Replace assetsExpand assets
Systems
developmentBrand Building
Skills Development
IncreasedCompetitiveness
Cost efficiencyProduct Innovation
Customer Experience
#1 inIndustry
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Analysing Performance
ROE
Asset
Turnover
Net
Margin Leverage
AssetManagement
MarginManagement
FinancialManagement
RevenueAssets
ProfitRevenue
AssetsEquity
ProfitEquity
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Net Margin
Equity
Debt
Assets
Revenue
Expenses
Profit
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Asset Turnover
Equity
Debt
Assets
Revenue
Expenses
Profit
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Leverage
Equity
Debt
Assets
Revenue
Expenses
Profit
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ROE levers
DISNEY 1980
16% = 0.68 x 15% x 1.6
DISNEY 1983
7% = 0.55 x 7% x 1.6
ROENet
Margin
Asset
Turnover
Gearing
OperatingDecisions
InvestingDecisions
FinancingDecisions
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Influencing Performance
1. Increase revenue or decrease asset base
The effect of volume growth/customer growth/brandstrength/order book
Asset utilisation/working capital management/reducingnon productive assets
2. Make more profit out of existing revenue
The effect of margin adjustments due to pricing
The effect of operating efficiencies/innovation inproduction/economies of scale/buying power over
suppliers
3. Increase levels of debt
The effect of gearing/leverage
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Key Performance Metrics
1984 1989 1994
Net Income $94m $703m $1 110m
Gross Margin 17% 25% 27%
Net Margin 7% 15% 17%
Asset Turnover 0.55 0.79 0.95 RoA 4% 12% 16%
RoE 7% 26% 27%
Share price $53 $484 $624
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History Repeats
2000 share price trades at $150
2002 share price drops below $100
2004
Comcast attempted takeoverat $75 - Eisner fired
2006 share price drops to $33
2008
share trades below $20
2010 share is listed at $34
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Key Learning Points
Business is about doing the basics well
Smallchanges can make a big difference
Understand the limitations of the financialstatements
Understand the usefulness of financialstatements
Appreciate the key financial indicators used byshareholders to judge performance and valuecreation
Review the importance of strategy and leadershipIn influencing performance