Finance’s notes

Financial literacy = passport to financial freedom :

High levels of economic hardship and a lack of financial literacy are correlated.
Vulnerable communities  low levels of understanding (how to calculate loan interest, how it
accumulates, how to properly limit risk/budget) make the situation worse.
The world's population is estimated to be one-third financially literate
According to Aimée Allam, closing the wealth gap depends on increasing financial literacy.
In 2014, the UK has a financial literacy rate of roughly 68%, compared to 28% in China.
France has a level of 54%, which puts it below the UK.
Depending on several characteristics including financial literacy level, deprivation level, age,
and ethnicity, diverse approaches to financial decision-making and financial status exist in
England. In general, those who lack financial literacy, are the poorest, are the youngest, and
belong to a minority group are those who are most harmed.
Financial literacy  You would be less vulnerable to losses if you invested in several
companies + If consumers wish to maintain their current spending patterns, prices and income
must evolve in a manner that is consistent with inflation.

Finance ? :
How to use our few resources wisely and make the best economic judgments.
The objective is to boost sales and produce future profits through appropriate investments.
Whether a certain investment is relevant is still up for debate. It will rely on the operation's
return value, which is determined by using the formula (last value - first value/first value) x
100.
Thus, we are able to consider several possibilities and select the one that will benefit the
company the best.
The main focus of corporate operations is finance.
Business activity  the process of acquiring and disposing of assets (real, financial/tangible,
and intangible).
Business activities have two functions : growing wealth and creating value/managing wealth
to satisfy economic demands.
Asset appraisal informs business choices in the beginning (need to measure the value
determined by the financial market).
The main problem in finance and business is valuation.
Companies make financial decisions regarding their capital budgeting, real investments,
financing (finance a project by selling financial assets, securities, or claims), payout (paying
dividends, buying back shares, etc.), and risk management (which risks are worthwhile
taking/better to avoid, etc.).
A set of fundamental modern finance concepts are developed and applied while making
financial decisions.

Fintech :
= products, business models, technologies, financial services industry.
Relates to : crowdfunding, virtual currencies, cash payment etc.
Over the past ten years, global Fintech investments have been steadily rising.

Breakout of ESG investing (2021) :

Climate-related proposals with average shareholder support of 58.8%.

Brexit and London :

 Repressed rule taker, green makeover, situation of Singapour.

Standardized methodology for financial analysis :

Balance sheet of a Corporation or Household :

Assets Liabilities

Cash Debt (D)

Capital Equity (E)
Intangibles

Value Value

Income statement :
Net income + funds raised from new debt issue + funds raised from new equity issue =
investment + coupon payment + dividend payment + tax payment.
Balance sheet’s changes :

Assets Liabilities

Cash Debt (D)

Capital Equity (E)
Intangibles

Value Value

Assets Liabilities

Cash Debt (D + funds raised from new debt

issue)
Capital + Investment
Equity (E + funds raised from new equity
Intangibles issue)

Value Value

Corporate/Household decisions :
Financial market :
Two key takeaways:
-Adequate asset valuation is a prerequisite for making wise economic decisions.
-The financial market determines how much an asset is worth.
The financial market plays a crucial role in the economy by directing economic decisions
made by businesses and households at the micro level and assigning resources across various
economic activities at the macro level.
Financial market at the center of the economy:

Financial market & intermediaries :

The following are the purposes of financial markets:

-Allocating resources (over time, money is borrowed to purchase goods/across various
economic stages, and is subsequently invested in stocks/bonds)
-Price exploration (Market prices reflect available information)

Tangible assets :
Income  money earned via employment or gained through personal investments.
Wealth  Value of accumulated assets.
Asset  Anything of economic worth that can be sold for money.
Liability  A required repayment of a financial or legal obligation.
Liquid assets  A resource that can be simply and rapidly turned into cash.
Illiquid assets  A resource that cannot be swiftly turned into cash without suffering a severe
loss in value.
3 tangible/financial assets :
1) Loans  A contract between a borrower and a lender.
2) Bonds  An IOU from a borrower that guarantees repayment by a specific date
3) Stocks  Symbolize ownership in a publicly traded corporation.

Financial market :
 Bringing people together to ensure that money goes where it is most needed (the
money from the business is used by finance for businesses to employ, invest in, and
develop; by the government to assist with building roads, hospitals, and houses; and
finally, by mortgage or retirement savings).

Roles of a Finance manager :

Financing decision  where to find financing for an investment.
Investment decision  where to place your resources.
Dividend decision  what portion of the profits should go to shareholders and what portion
should be put back into the company.

Financial intermediaries :
Used to characterize financial institutions like insurance companies, banks or pension fund.
They assist a company in saving or borrowing money and may act as a go-between for a
service provider and a customer.