Principles of Finance

This course offers you an adequate introduction to the world of finance, its role, key activities and principles. We explain the notion of value-creation and how return-on-capital is an important metric for measuring how shareholders’ value is created and maximised. You will understand the three main functions of finance, namely; capital efficiency, capital budgeting and capital financing. While discussing these, we will zoom in on a company’s operating assets and their customary funding sources. You will understand the differences, advantages and disadvantages of equity and debt financing. 

We identify five key principles in finance that every successful analyst should be cognisant of, before delving into the details of each principle and its linkage to the three main functions we have explained. You will comprehend how the value of money changes over time in context of inflation and interest rates. We will explain the concept of opportunity cost and investors’ required rate of return. 
 
You will master the practical applications of moving the cash flow forward and backward in time, with specific exercises for single cash flows, multiple cash flows, annuities and perpetuities. After all, this fluctuating value of money gives rise to individuals' pusuit of preserving or increasing its value through investing, where higher risk often corresponds to higher returns and vice versa. Indeed, every successful analyst should conduct debt amortisation schedule properly, and this course will get you there. We will discuss the notion of arbitrage in finance and why finance models assume arbitrage-free nature of markets. We will explain the concept of opportunity cost. In addition, you will take a deep dive into capital budgeting techniques and their practical applications, including the NPV, IRR and Payback period. Before concluding the course, we will discuss why cash flow is the most pivotal aspect of finance.