公司金融英文课件Lecture 8 Coursework Briefing

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《Corporate Finance (公司金融学)》课件 (2)

Balance Sheet Analysis
• When analyzing a balance sheet, the financial manager should be aware of three concerns:
1. Accounting liquidity 2. Debt versus equity 3. Value versus cost
Sources of Information
• Annual reports • Wall Street Journal • Internet
– NYSE () – Nasdaq () – Text (/cj)
• SEC
– EDGAR – 10K & 10Q reports
Total operating revenues Cost of goods sold Selling, general, and administrative expenses Depreciation Operating income Other income Earnings before interest and taxes Interest expense Pretax income Taxes
Current: $71 Deferred: $13 Net income Retained earnings: Dividends:
$2,262 - 1,655
- 327 - 90 $190 29 $219 - 49 $170 - 84
$86 $43 $43
U.S.C.C. Income Statement
Accounting Liquidity
• Refers to the ease and quickness with which assets can be converted to cash.

公司金融课件Chap008

◦ Not so, there are many pitfalls in identifying incremental cash flow
8-6
Sunk costs are not relevant
◦ Just because “we have come this far” does not mean that we should continue to throw good money after bad.
8-3
When performing capital budgeting analysis:
◦ Always base calculations on cash flow, not income
Earnings ≠ Cash Need cash for capital spending Need cash for rewarding shareholders Therefore, capital expenditure analysis must be based on cash
8-2
Cash flows matter—not accounting earnings. Sunk costs don’t matter. Incremental cash flows matter. Opportunity costs matter. Side effects like synergy, and erosion matter. Taxes matter: we want incremental aftertax cash flows. Inflation matters.
Salvage Value
◦ The market value of an asset less the tax. ◦ Don’t forget to treat salvage value (after tax, of course) as a cash inflow at the end of the project

--and return(公司金融英文版) ppt课件

8-8 Markowitz Portfolio Theory
% probability
Standard Deviation VS. Expected Return
Investment D
20
18
16
14
12
10
8
6
4
2
0
-50
0
50
% return
McGraw Hill/Irwin
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved
McGraw Hill/Irwin
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved
8-4 Markowitz Portfolio Theory
Proportion of Days
Price changes vs. Normal distribution
Expected Return (%)
McGraw Hill/Irwin
Standard Deviation
Microsoft - Daily % change 1990-2001
0.14 0.12
0.1 0.08 0.06 0.04 0.02
0
-9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9
McGraw Hill/Irwin
Daily % Change
Copyright © 2003 by The McGraw-Hill Companies, Inc. AHale Waihona Puke l rights reserved

《Corporate Finance (公司金融学)》课件 (3)

3.5 Practicing the Principle: A Lending Example
Consider an investment opportunity that costs $50,000
this year an provides a certain cash flow of $54,000
Intertemporal Consumption Opportunity Set
Consumption at t+1
$120,000 $100,000 $80,000 $60,000 $40,000 $20,000
$0 $0
A person with $95,000 who faces a 10% interest rate has the following opportunity set.
now; invest the remaining $35,000; consume $38,500 next year.
$40,000
$38,500 $35,000 (1.10)1
$20,000
$0 $0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
Consumption today
– Risk intermediation
• Financial intermediaries can tailor the risk characteristics of securities for borrowers and lenders with different degrees of risk tolerance.
• The intermediary in turn loans $30,000 to each of the 4

金融学英文课件 (8)

• Checks are legal proof of payment. • Customers wanted them back. • Starting in 2004 • Banks can transmit digital images • Substitute checks are proof of payment • Electronic mechanisms for clearing checks have lowered costs and kept checks as an attractive means of payment.
2-12
(2) Checks
• A check is an instruction to the bank to take funds from your account and transfer them to another account.
• A check is therefore not a final payment as currency is.
The more costly it is to convert an asset into money, the less liquid it is.
•
Financial institutions use:
• Market liquidity - the ability to sell assets for money. • Funding liquidity - ability to borrow money to buy securities or make loans.
2-1
Money and How We Use It
• Money is an asset that is generally accepted as payment for goods and services or repayment of debt. • Income is a flow of earnings over time, where wealth is the value of assets minus liabilities. • Money has three characteristics: 1. A means of payment 2. A unit of account, and 3. A store of value. • The first of these characteristics is the most important

公司金融英文课件Lecture 18 Financial Risk Management - Print Version(1)

Forward Contract
Benefits:ቤተ መጻሕፍቲ ባይዱ
• Eliminates downside risk But…
• Also eliminates upside risk
• Still exposed to credit risk – possibility that the counterparty will not honour the obligation
What action should GGF take to lock in the £2 price?
Suppose the price of wheat actually turns out to be £3. Evaluate GGFs gains and losses.
Suppose the price of wheat actually turns out to be £1. Evaluate GGFs gains and losses.
The Payoff Profile
Two key points: 1. Downward slope = negative relationship because higher oil prices mean lower profits 2. Steepness of the slope indicates the exposure to the risk because oil is a significant cost to the business
Interest Rate Volatility: A Historical Perspective
Exchange rate Volatility: A Historical Perspective

金融市场与金融机构英文课件 (8)

Fundamentals of Insurance
5. The insurance company must have a large number of insured so that the risk can be spread out among many different policies. 6. The loss must be quantifiable. For example, an oil company could not buy a policy on an unexplored oil field. 7. The insurance company must be able to compute the probability of the loss’s occurring.
Life Insurance
Life insurance policies come in many forms. Some of the typical policies include: • Term Life: the insured is covered while the policy is in effect, usually 10–20 years. • Whole Life: similar to term life, but allows the policyholder to borrow against the policies cash value. When the term of policy expires, the insured can get the cash value of the policy.
Life Insurance
Life insurance policies come in many forms. Some of the typical policies include: • Universal Life: includes both a term life portion and a savings portion. • Annuities: pays a benefit to the insured until death, to cover retirement years.

《Corporate Finance (公司金融学)》课件 (15)

Expansion $3,000 640 $2,360 $9.83 15% 20%
Financial Leverage and EPS
EPS
12.00
10.00
8.00
6.00
Break-even
point 4.00
2.00
0.00 (2.00)
1,000
Disadvantage to debt
Debt
EBIT rBB
rB B
Thus, the total cash flow to all stakeholde rs is
(EBIT rB B) rBB
The present value of this stream of cash flows is VL Clearly
(EBIT rBB) rBB EBIT
No Debt
Advantage to debt
2,000
3,000
EBEIBTI in dollars, no taxes
Assumptions of the Modigliani-Miller Model
• Homogeneous Expectations • Homogeneous Business Risk Classes • Perpetual Cash Flows • Perfect Capital Markets:
The Capital-Structure Question and The Pie Theory
• The value of a firm is defined to be the sum of the value of the firm’s debt and the firm’s equity.

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To protect the bank
Source: /news
Truth and Consequences
• Following the financial crisis of 2007/8, the reputation of banks and bankers is at an all time low • The Libor scandal has further undermined trust in banks. Paul Tucker, the deputy governor of the Bank of England called the Libor market a "cesspit".
Why is it important?
• Libor is considered to be one of the most crucial interest rates in finance, upon which trillions of financial contracts rest, and the exposure of its rigging has shocked many beyond the world of finance. • Libor is used to set a range of financial transactions worth an estimated $300 trillion. $300 trillion is equivalent to approximately four and a half times global GDP
• 1,500 words • Report on current finance topic • • 30% of Module Mark Briefing in week 8
1.January 2013
• • 1 hour MCQs
•
20%
2.May 2013
• 2 hours
•
• •
50%
Three questions from six Specimen paper next semester
• Lawsuits have been launched by US municipalities, pension funds and hedge funds
Truth and Consequences – the world
• The consequences are also global.

$300,000,000,000,000
Libor in the News
How is Libor set?
• Every day a group of leading banks submit rates for 10 currencies and 15 lengths of loan ranging from overnight to 12 months. The most important is the three-month dollar Libor. The rates submitted are what the banks estimate they would pay other banks to borrow dollars for three months
• Submission on 11th March 2013 • Feedback on draft
Libor in the News
What is Libor?
• The Libor, or London Interbank Offered Rate, is a global benchmark interest rate used to set a range of financial deals. It is also a measure of trust in the financial system and the faith banks have in each other's financial health
/news/uk-18620314
So how was Libor rigged?
In two ways:
1. By traders for profit.
• • Since the rates submitted are estimates not actual transactions it's relatively easy to submit false figures. Traders at several banks conspired to influence the Libor by getting colleagues to submit rates that were either higher or lower than their actual estimate
Truth and Consequences – the money
• While those paying interest on loans would have benefited from artificially low Libor rates, savers and investors would have lost out. Because Libor is used to set a huge range of financial transactions, the potential losses are huge.
Traders for Profit “Coffees will be coming your way” “Dude. I owe you big time!...I’m opening a bottle of Bollinger” “Ask for High 6M Fix”
Reputational Damage
•2 July: Barclays chairman Marcus Agius resigns and the government launches two inquiries into Libor and banking standards
•3 July: Barclays chief executive Bob Diamond resigns
Truth and Consequences - Barclays
27 June: Barclays fined £290m by US and UK regulators for attempting to manipulate Libor rates •28 June: Barclays shares plunge 15%
So how was Libor rigged?
In two ways:
1. By traders for profit. 2. To protect the bank.
• At the height of the financial crisis in late 2007, many banks stopped lending to each other over concerns about their financial health with some banks submitting much higher rates than others.
Leeds University Business School
LUBS1035 Foundations of Finance
2012/13
John Smith
Lecture 8: Coursework Briefing
Module Objectives
Skills outcomes
On completion of this module you should be able to:
Your Coursework Assignment
You are a Financial Manager working for Barclays plc. The Bank has recently recruited a new Chairman, Sir David Walker, and he is keen to understand the implications of the recent Liborfixing scandal for Barclays Bank. You have been asked to provide a 1,500 word briefing paper on the Libor scandal for Sir David in the form of a report.
• Demonstrate problem solving, analytical and quantitative skills by applying current theory and appropriate analytical tools to simple financial problems; • Demonstrate written communication and critical thinking skills in the written parts of the summative assessment; and
•
Barclays was one of those submitting much higher rates, attracting some media attention. This prompted comment that Barclays was in trouble so Barclays began to submit much lower rates.