IB Lecture 9 Corporate Finance Flashcards
Basic accounting
balance sheet
income statement
+ two more
A Balance Sheet
-snapshot in time of the firm’s assets and liabilities
Assets
- Left-hand side
- in order of decreasing liquidity
Liabilities and Owners’ Equity
- right-hand side
- in ascending (aufsteigend) order of when due to be paid
Total Value of Assets current assets
Current assets:
cash
inventory
account receivables (people who own money to me)
+ Fixed Assets
- Tangible
- Intangible
Total Value of Liabilities and Shareholders’ Equity
Current Liabilities
Long Term Debt
- Shareholder Equity
Net working capital
current assets - current liabilities
working capital management
how to manage everyday finances?
capital budgeting
which fixed assets should I buy?
(What long-term investments or projects should the business take on?
Capital Structure
-How should I finance my assets?
-Own money= equity
or borrow money?
(Should we use debt or equity?)
Investments
- look at return
- look at standard deviation
How do I measure risk?
- volatility
volatility
= standard deviation = how much something fluctuates around an average
volatility
= standard deviation = how much something fluctuates around an average
Problems with the payback system
- neglecting time value
- no cashflows after the cutoff-point are considered
How to overcome the agency problem?
- incentives can be used to align management and shareholder interests.
- corporate control: the threat of a takeover may result in better management
Calculations
Look notability on this lecutre
