• In this section, we will provide an overview of financial management, financial markets, and institutions. We will cover the following key points:
• Identifying the critical financial decisions that confront financial managers in any business organization.
• Explaining the rationale behind the primary objective of maximizing the current value of a firm's stock.
• Elaborating on the connections between stock price, intrinsic value, and executive compensation.
• Discussing the influence of agency conflicts on the pursuit of the goal to maximize stockholder value.
• Examining the role of ethics in the context of corporate finance.
• Identifying the diverse types of financial markets and financial institutions and elucidating their contributions to the efficient allocation of capital.
• Offering insights into the functioning of the stock market and distinguishing between various categories of stock markets.
• Highlighting the significance of market efficiency and providing an understanding of why some markets exhibit higher levels of efficiency than others.
• Developing a foundational understanding of behavioral finance, which explores the behavioral factors impacting financial decision-making.

• Examine the significance of generally accepted accounting principles (GAAP) in the context of the economy.
• Elaborate on the balance sheet equation and the necessity for it to remain in equilibrium.
• Differentiate between market-value and book-value balance sheets.
• Recognize the fundamental formula for the income statement and its informational content.
• Grasp the computation of cash flows pertaining to operational, investment, and financing activities as mandated in the statement of cash flows.
• Appraise a company's free cash flow and elucidate its substantial impact on firm valuation.
• Delve into the distinction between average and marginal tax rates.

• Explain the three perspectives from which financial statements can be viewed.
• Describe common-size financial statements, explain why they are used, and be able to prepare and use them to analyze the historical performance of a firm.
• List the five groups of ratios and identify, calculate, and interpret the key ratios in each group and discuss each ratio’s relationship to the balance sheet and income statement

• Discuss the tendency of ratios to fluctuate over time (which may or may not be problematic); explain how they can be influenced by accounting practices Aswell as other factors; and explain why they must be used with care.
• Discuss why return on equity (ROE) is the key ratio under management’s control and how the other ratios impact ROE, and explain how to use the DuPont equation for improving ROE.
• Explain what benchmarks are, describe how they are prepared, and discuss why they are important in financial statement analysis

Introduction:

• The concept of the time value of money is a fundamental principle in finance, playing a pivotal role in various financial decisions and calculations. In this context, we will explore how the time value of money operates and understand its significance in financial matters.

Understanding Future Value:

• To begin, we'll delve into the concept of future value, which involves key terms such as principal, simple interest, and compound interest. By employing the future value formula, we can make informed business decisions that account for the growth or depreciation of funds over time.

Exploring Present Value:

• Moving on, we'll discuss the concept of present value and its relationship with future value. We'll also utilize the present value formula to guide business decisions, recognizing that it helps us assess the current worth of future cash flows. Additionally, we'll highlight that the principle of compounding extends beyond money and demonstrate how to calculate growth rates using the future value formula.

Calculating Lump Sum Values:

• In this section, we will walk through the calculation of both present and future values for lump sums, providing practical insights into how these calculations can be applied to financial scenarios.

• Calculate the present value and future value of an uneven cash flow stream.
• Explain why cash flows occurring at different times must be adjusted to reflect their value as of a common date before they can be compared, and compute the present value and future value for multiple cash flows.

• Exploring Bond Features:
• Recognize the distinct characteristics of both corporate and government bonds.
• Determining Bond Prices:
• Examine the factors influencing bond prices in the market, including the connection between interest rates and bond prices.
• Understand the evolving nature of a bond's price as it approaches its maturity date.
• Corporate Bond Market and Varieties:
• Provide an overview of the corporate bond market.
• Outline three different categories of corporate bonds.
• Valuing Bonds and Interest Rate Impact:
• Elaborate on the process of calculating the value of a bond.

Bond Characteristics:

• Distinguish between the unique attributes of corporate and government bonds.
• Determining Bond Prices
• Explore the factors that influence bond prices in the market.
• Examine the correlation between interest rates and bond prices.
• Understand how a bond's price evolves as it nears its maturity date.
• Corporate Bond Market and Varieties:
• Provide an overview of the corporate bond market.
• Outline three distinct categories of corporate bonds.
• Bond Valuation and Interest Rate Impact:
• Explain the methodology for calculating a bond's value.
• Discuss the inverse relationship between bond prices and fluctuations in interest rates.

• Distinguish between a bond’s coupon rate, yield to maturity, and effective annual yield.
• Calculate a bond’s yield to maturity
• Explain the different types of risk that bond investors and issuers face, and discuss how a bond’s terms and collateral can be changed to affect its interest rate.

• Discuss the legal rights of stockholders and explain the distinction between a stock’s price and its intrinsic value
• Explain why many financial analysts treat preferred stock as a special type of bond rather than as an equity security.
• List the key characteristics of preferred stock, and describe how to estimate the value of preferred stock.
• Explain how valuing preferred stock with a stated maturity differs from valuing preferred stock with no maturity and calculate the price of a share of preferred stock under both conditions.

• Describe how the general dividend-valuation model values a share of stock.
• Discuss the assumptions that are necessary to make the general dividend-valuation model easier to use and use the model to compute the value of a firm’s stock.
• Explain why g must be less than R in the constant-growth dividend model.