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Contents - Lessons & Practice

Business

Principles of Finance 2e

OpenStax book

OpenStax

Principles of Finance 2e

20 lessons

One lesson for each chapter of Principles of Finance 2e, in the book’s order. The lesson teaches what that chapter says you need to know, then checks it.

  1. 1Introduction to FinanceThere are three broad areas of finance: business finance, investments, and financial markets and institutions
  2. 2Corporate Structure and GovernanceThe most common forms of business organizations are sole proprietorships, partnerships, corporations, and hybrids.
  3. 3Economic Foundations: Money and RatesThe point of intersection of the supply and demand curves determines the equilibrium price and quantity
  4. 4Accrual Accounting ProcessCash-basis accounting records revenues and expenses only when cash is received or distributed.
  5. 5Financial StatementsIt is laid out to clearly depict and support the accounting equation: assets = liabilities + owner ’ s equity .
  6. 6Measures of Financial HealthCommon ratios to measure liquidity include the current ratio, the quick ratio, and the cash ratio.
  7. 7Time Value of Money I: Single Payment ValueBecause it is possible to earn interest income on cash that you decide to deposit in an investment or an interest-bearing account, money that you have now or receive sooner will be more valuable to you than the same…
  8. 8Time Value of Money II: Equal Multiple PaymentsA perpetuity is an investment that is intended to provide an expected return indefinitely, either remaining constant or growing by an incremental amount.
  9. 9Time Value of Money III: Unequal Multiple Payment ValuesThese future cash flows could involve inflows or outflows of cash in unequal amounts.
  10. 10Bonds and Bond ValuationWhen interest rate yields are plotted against their respective maturity periods and these plotted points are connected, the resulting line is called the yield curve.
  11. 11Stocks and Stock ValuationThe most common DDM is the Gordon growth model, which values stock entirely on expected future dividends.
  12. 12Historical Performance of US MarketsThe Federal Reserve considers moderate inflation rates optimal in their oversight of the US economy.
  13. 13Statistical Analysis in FinanceThe standard deviation and variance are measures of the spread of a data set.
  14. 14Regression Analysis in FinanceA correlation coefficient called r is used to assess the strength and direction of the correlation.
  15. 15How to Think about InvestingAs investors hold multiple assets in a portfolio, they are able to eliminate firm-specific risk.
  16. 16How Companies Think about InvestingThe discounted payback period uses the time value of money to discount future cash flows to see how long it will be before the initial investment of a project is recovered.
  17. 17How Firms Raise CapitalCapital structure refers to how a company finances its assets.
  18. 18Financial ForecastingInterrelationships among historical data, the forecasted income statement, and the forecasted balance sheet are all used to estimate each line item in the financial statements
  19. 19The Importance of Trade Credit and Working Capital in PlanningFinancial managers understand the significance of net working capital (current assets - current liabilities) and various liquidity ratios as they attempt to ensure that bills can be paid.
  20. 20Risk Management and the Financial ManagerThis leads to transaction risk, translation risk, and economic risk as currency values change.