Lesson 1 Wrap-Up

Congratulations—you made it through Lesson 1 of Finance 301!

This lesson introduced you to the world of finance. Financial markets play a very important role in our society helping individuals and institutions make choices regarding the consumption and savings for future consumption. You also reviewed the different types of business organizations, defined the main goal of corporations, discovered how financial markets can benefit society, defined an agency relationship, distinguished between the primary market and secondary market, discussed why ethics is important in business, and finally reviewed the instructions regarding your group stock exercise.

Following is a brief overview of where you will be going from here in this course.

The course emphasizes hands on learning exercises that are designed to illustrate practical tools and techniques for understanding and applying the foundational concepts of corporate finance. Numerous examples are explained to help you understand how to use a financial calculator. Financial models are built in Excel spreadsheets to help understand how financial managers analyze financial statements, and projects. The lessons are organized into the following major topic areas.

1. The first section introduces finance to help you understand important accounting and financial analysis issues in corporate finance. The tools of common size and ratio analysis are described and incorporated into Excel spreadsheet models to provide valuable insights for managers, creditors, and investors regarding the strengths and weaknesses of a corporation.
2. Financial models are built from a solid foundation of the basic concepts of time value of money (TVM). TVM concepts are introduced with the use of a financial calculator and Excel spreadsheets. These concepts are included in analyses of real world financial issues such as valuing annuities and lump sum cash flows, creating a loan amortization schedule, and calculating the value of corporate bonds.
3. Next, the tradeoff of risk and return in financial models is developed. These concepts are then used to build models that value common stock and capital budgeting projects. The tradeoff of risk and return, diversification principles, and calculation of weighted average cost of capital (WACC) are important foundational concepts in finance that are applied in corporate finance as well as other broader areas of finance including personal finance and investments. 
4. Lastly, capital budgeting techniques are presented with an emphasis placed on the net present value (NPV) and internal rate of return (IRR) techniques. These techniques require a thorough understanding of cash flow analysis that includes the ability to identify relevant cash flows in a capital budgeting analysis. Common practical examples of replacing equipment, introducing new product lines, and implementing cost savings projects are demonstrated.