Topic 1 Flashcards
What are the 3 sub-specialties of Finance?
Corporate Finance
Investments
Institutions
Corporate Finance
a.k.a Managerial Finance, Financial Management, Business Finance
Goal = maximize shareholder/owner wealth
Capital budgeting analysis: deciding what assets to buy
w/in company, for company
Investments
Goal = strategically invest other people’s money
Most common responsibility = asset manager (invests funds to earn positive returns - through mutual funds (stocks), real estate (real estate investment trusts), venture capital (private companies), etc.
Asset pricing = valuing assets
Longing / Shorting
Institutions
BANKING (consumer & commercial), investment banks, pension funds, insurance companies
Commercial Banking
Teller (not much training –> Credit Analyst (number crunching / people skills), Manager
Corporate Finance
Highest Ranking official = CFO (CEO’s right-hand person in all money matters)
Types of decisions they make: Cash management Tax strategies Financial policy implementation Investing and financing decisions
Financial planning
Work w/ individuals
Helps w/ tax planning, trusts, estates, wills
Must be CFP (certified financial planner)
Insurance
Corporate: Risk Manangement
Personal: auto, life, health, etc. insurance
Investment Banking
2008 Meltdown caused these firms to change their emphasis:
- Lehmen Brothers
- Merrill Lynch
- Goldman Sachs
- Morgan Stanley
6 primary roles of I-bankers: (read up on these…maybe..)
- Company / Industry Analysis
- Mergers / Acquisitions
- Raising capital via corporate offerings
- Sales / trading
- Private client services
- Back office support
Asset (Money) Management
Investing OPM (other ppl’s money) - typically as fund managers
Mutual funds, pension funds, insurance funds,
AM’s can invest in stocks, bonds, real estate, any asset
CFA (chartered financial analyst) = typical requirement for most funds & investment banks
Real Estate
Investing & Managing real property
Hedge Fund Management
Freaking rich
Very quantitative
Goal = earn strong return for investors
Difference from mutual fund = no limits: can buy long or sell short & can sell financial derivatives
Only the best Hedge fund managers have survived b/c of the 2009 crisis
Private Equity
Includes angel financing, venture capitalists, & take-over firms
Investing in small companies to help them grow / go public
Buyout firms / Leverage buyouts
Role of marketing
Sell product / service through advertising, etc.
Role of operations
Supply chain / efficiency
No longer company vs company, but SC vs SC
