What is Finance?
Finance is the art and science of managing financial and real assets The processes, institutions, markets, and instruments involved in the transfer of money between individuals, businesses, and governments form the foundation of the study of finance Career Opportunities in Finance
There are three areas of the opportunity for finance graduates. Financial Institutions
Banks, Insurance Companies, Mutual Funds, and Investment Banks The following skills are important:
Interest rate models
Types of financial instruments
General business administration
A common entry-level position is bank officer trainee
This include learning teller operations
Cash management operations
May become a branch manager or a specialist in one of many areas. Investments
Often starting in brokerage houses in Sales, Security Analyst or Financial Planning Others work in banks, mutual funds, insurance companies, or financial consulting firms. The main functions are sales, security analysis, and management of investment portfolios Financial Management
This is the largest area of the 3 with opportunities in financial institutions, industrial and retail firms. Also, there are opportunities in government and non-profit organizations. Responsibilities include deciding credit terms level of inventory level of cash merger and acquisition analysis and dividend policy. Capital Budgeting
Financial Forecasting and Planning
Financial Risk Management
Regardless of which area of finance majors enter into, he or she will need knowledge of all three. Modern Corporate Finance
In the early 1900s Financial Management emphasized the legal aspects of mergers, the formation of new firms, and the various types of Securities that firms could issue to raise capital. In the 1930s the emphasis shifted to bankruptcy and reorganization, to corporate liquidity, and to the regulation of security markets. During the 1940s and early 1950s finance continued to be taught as a descriptive, institutional subject, viewed more from the standpoint of an outsider rather than and from that of management. However, a movement toward theoretical analysis began during the late 1950s, and the focus shifted to managerial decisions regarding the choice of assets and liability so as to maximize the value of the firm. Every Firm must answer three questions
What long-term investments should we make?
Where will we get the financing to pay for the investment?
How will we manage our everyday financial activities?
Corporate finance, broadly speaking is the study of ways to answer these three questions. We will examine these issues over the semester.
Importance of Financial Management
Marketing forecast product sales; Engineering and production staff would determine the required assets.; Financial managers would raise the required capital. New Way
Now the process is much more coordinated. Financial managers usually head up this effort. It is much more important to coordinate decisions.
The Financial Manager's Responsibilities
1. Forecasting And Planning
The financial manager must work with others as the organization looks ahead. Financial managers assure all participants are using the same assumptions on common inputs. 2. Major Investment And Financing Decisions
Financial managers determine the optimal sales growth rate, what assets to buy, and how to finance the investments (debt (long or short-term) or equity). Dividend policy is determined by the investment opportunities of the firm. 3. Coordination And Control
Financial managers ensure efficient operations. All business decisions have financial implications which need to be considered. 4. Dealing With The Financial Markets
Financial managers interact with capital markets.
5. Risk Management
All businesses face risks:...
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