Summary: Finance

Read the summary and the most important questions on finance

• 1 Lesson 1 introduction to corporate finance and capital markets

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• What are 10 attributes of a good business?

  1. Large market
     
  2. Scalable
  3. Product-based
  4. Recurring revenues
  5. Patented/protected
  6. Synergetic
  7. Branded
  8. Community-focused
  9. Asset-light
  10. Disruptive

• How to stand a business: what does the EMBOSS method entail?

  • Entry barriers
    
  • Management quality
  • Brand ability
  • Operating leverage
  • Scalability
  • Sales recurrence

• What is the primary goal of corporate finance? What is another word for it?

  To maximise or increase shareholder value.
  
  Investment banking.

• What area of finance dealing is corporate finance?

  • The sources of funding
  • The capital structure of corporates
  • The actions that managers take to increase the value of the firm to the shareholders
  • The tools and analysis used to allocate financial resources

• What is the typical role of an investment bank?

  To evaluate the company’s financial needs and raise the appropriate type of capital that best fits those needs.

• With what transaction action is corporate finance and corporate financier associated?

  The transactions in which capital is raised in order to create, develop, grow or acquire businesses.

• Projects that increase a firm's value may include a wide variety of different types of investments, including what?

  Expansion policies, or mergers and acquisitions (M&A).

• What are the two rules of financial leverage?

  1. As long as a business generates a ROA above the cost of debt, additional debt will increase the ROE.
  2. Too much debt increases the chance of a business to default, which means that the price of debt rises.  

• 1.1.1 Capital structure

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• Of what is the capital structure a composition of?

  The passive side on the balance sheet.

• Through what 3 things can a business be financed?

  1. Senior debt
     
  2. Mezzanine financing structures
  3. Equity