Beruflich Dokumente
Kultur Dokumente
Sanjay Ghimire
1 SOM-TU
Course Contents
2
Meaning of Finance
Defined as the art and science of managing money.
Thus the method of acquiring, managing and allocating the
fund is known as finance.
Moving scarce resources over time and states of nature
Examples:
Time Car loan
States of nature Car insurance
President
Treasurer Controller
Inventory Financial
Manager Accounting
Capital
Budgeting Tax Department
16 Director
Finance in the Organizational
Structure
19
Financial markets and financial
institutions
F in a n c ia l In s titu tio n s
D e p o s i t o r y I n s t i t u t io n s C o n t r a c t u a l s a v in g s In v e s t m e n t
in s t i t u t i o n s in t e r m e d i a r i e s
C o m m e r c ia l b a n k s L i f e in s u r a n c e c o m p a n ie s F i n a n c e c o m p a n ie s
S a v i n g & lo a n s F i r e & c a u a lt y M u tu a ls f u n d s
a s s o c ia t io n s in s u r a n c e c o m p a n y
M u t u a l s a v in g b a n k s P e n s io n f u n d s , g o v e r n m e n t M o n e y m a rk e ts
r e tir e m e n t f u n d s m u tu a l f u n d s
C r e d i t l u n io n s
20
Capital Formation Process
Direct Transfers
Securities (Stock and Bond )
Business Savers
Money
Indirect Transfers through Investment Bankers
Investment
Business Savers
Banking
Indirect Transfers through a Financial Intermediary
Commercial Banks
Saving and Loan, Mutual saving banks and
credit unions
Insurance companies
Mutual funds
Pension funds
22
Financial Markets
23
Recent Trends
By location
Physical location exchanges
Computer/telephone networks
By the way that orders from the buyers and
sellers are matched
Open outcry auction
Dealers (ie, market makers)
Electronic communication network (ECNs)
25
Tax environment
26
27
The Objective in Corporate Finance
Aswath Damodaran
Stern School of Business
Invest in projects that yield a return greater than
the minimum acceptable hurdle rate.
Choose a financing mix that minimizes the hurdle
rate and matches the assets being financed.
If there are not enough investments that earn the
hurdle rate, return the cash to the owners of the
firm (if public, these would be stockholders).
STOCKHOLDERS
FINANCIAL MARKETS
What can go wrong?
FINANCIAL MARKETS
Traditional corporate financial theory breaks
down when ...