Financial Management and Investment Analysis

Financial Management

• Financial management involves planning, organizing, and controlling financial resources to achieve business objectives
• Key responsibilities:
  • Raising capital (equity and debt)
  • Allocating resources (capital budgeting)
  • Managing cash flow
  • Managing risk (financial risk management)
  • Monitoring and controlling financial performance

Investment Analysis

• Investment analysis involves evaluating investment opportunities to determine their potential return and risk
• Key concepts:
  • Time value of money (present value, future value, net present value)
  • Risk and return tradeoff
  • Diversification and portfolio management
  • Security analysis (fundamental and technical analysis)
  • Investment valuation models (e.g. dividend discount model, capital asset pricing model)

Corporate Finance

• Corporate finance involves making financial decisions to maximize shareholder value
• Key areas:
  • Capital structure (debt and equity financing)
  • Capital budgeting (evaluating investment projects)
  • Dividend policy (distributing profits to shareholders)
  • Working capital management (managing current assets and liabilities)
  • Mergers and acquisitions (buying and selling companies)

Financial Markets

• Financial markets facilitate the exchange of financial assets between buyers and sellers
• Key types:
  • Money markets (short-term debt securities)
  • Capital markets (long-term debt and equity securities)
  • Foreign exchange markets (currencies)
  • Derivatives markets (options, futures, etc.)
  • Over-the-counter (OTC) markets (private transactions)

Risk Management

• Risk management involves identifying, assessing, and mitigating potential risks to a business
• Key types of risk:
  • Financial risk (market, credit, liquidity, operational risk)
  • Operational risk (process, systems, people, external events)
  • Strategic risk (business, industry, competitor risk)
  • Compliance risk (regulatory, legal, reputational risk)
  • Steps in risk management process:
    1. Identify and assess risks
    2. Develop risk mitigation strategies
    3. Implement and monitor risk management plans
    4. Review and update risk management process

Financial Management

• Financial management's primary objective is to achieve business objectives through planning, organizing, and controlling financial resources
• Key responsibilities include:
  • Raising capital through equity and debt
  • Allocating resources through capital budgeting
  • Managing cash flow to ensure liquidity
  • Managing risk through financial risk management
  • Monitoring and controlling financial performance to achieve objectives

Investment Analysis

• Investment analysis evaluates investment opportunities to determine potential return and risk
• Key concepts in investment analysis:
  • Time value of money (present value, future value, and net present value)
  • Risk and return tradeoff, where higher returns often mean higher risk
  • Diversification and portfolio management to minimize risk
  • Security analysis using fundamental and technical analysis
  • Investment valuation models, such as dividend discount model and capital asset pricing model

Corporate Finance

• Corporate finance involves making financial decisions to maximize shareholder value
• Key areas in corporate finance:
  • Capital structure decisions, balancing debt and equity financing
  • Capital budgeting, evaluating investment projects for value creation
  • Dividend policy, determining whether to distribute profits to shareholders
  • Working capital management, managing current assets and liabilities
  • Mergers and acquisitions, buying and selling companies to create value

Financial Markets

• Financial markets facilitate the exchange of financial assets between buyers and sellers
• Key types of financial markets:
  • Money markets, for short-term debt securities
  • Capital markets, for long-term debt and equity securities
  • Foreign exchange markets, for currency exchange
  • Derivatives markets, for options, futures, and other derivatives
  • Over-the-counter (OTC) markets, for private transactions

Risk Management

• Risk management identifies, assesses, and mitigates potential risks to a business
• Key types of risk:
  • Financial risk, including market, credit, liquidity, and operational risk
  • Operational risk, including process, systems, people, and external events
  • Strategic risk, including business, industry, and competitor risk
  • Compliance risk, including regulatory, legal, and reputational risk
• Steps in the risk management process:
  • Identify and assess risks
  • Develop risk mitigation strategies
  • Implement and monitor risk management plans
  • Review and update the risk management process