MN2002 –

Analysis of
Financial Data
Lecture 3: Finance
Fundamentals
Dr Lori Leigh Davis
lld2@st-andrews.ac.uk
Office hours: Wednesdays 10:00-12:00
Room 107 in the Gateway
 Dr Lori Leigh Davis
lld2@st-Andrews.ac.uk
Teaching Excellence Award Winner 2021-22
Bachelors of Technology (Hons), Vancouver, BC Canada
Masters in International Business, The Golden Dandelion Award Winner 2021-22
School of Management, St Andrews University
Outstanding Innovation in Teaching Award Winner 2018-19
PhD, School of Management/School of International
Relations, St Andrews University Nominated Best Post-Graduate Who Tutors Award 2016-17
Dr Lori Leigh Davis, PhD, MLitt, BTech, University of St Andrews All Rights Reserved
 YouTube:

Think and Grow Rich

(TAGR) – The Full
https://www.youtube.com/watch?v=eIU1002X3iE Movie
Week 6 Lecture 1. Introduction to the AFD Section of the Module
Week 6 Lecture 2. What Does Critical Analysis Sound Like?
Week 6 Lecture 3. Finance Fundamentals Economics

Finance
Management Accounting
Week 7 Lecture 1. Money – The History of Money and Financial Institutions
Week 7 Lecture 2. Money – Financial Systems, Markets and Investments
Week 7 Lecture 3. Personal Finance and Psychology of Money

*Week 8 Monday Tutorial 1 Topic: Money and Personal Finance

Week 8 Lecture 1. Corporate
Finance and Accounting
Statements

Week 8 Lecture 2. Moodle Quiz

10%

Week 8 Lecture 3. Case Studies of

Financial Crisis from Around the
World

*Week 9 Monday Tutorial 2

Topic: Corporate Finance and
Accounting
Week 9 Lecture 1.
Public/Government Finance

Week 9 Lecture 2. Case Studies –

Finances of Different Governments
Week 9 Lecture 3. Central Bank Digital Currencies and Countries Around
the World

*Week 10 Monday Tutorial 3 Topic: Central Bank Digital Currencies

Week 10 Lecture 1. Analysis of Financial Data – A Look A Publicly Traded Companies
Week 10 Lecture 2. Social and Responsible Finance/Governance and Ethics
Week 10 Lecture 3. Case Studies from Around the World (Shadow Finance/Money Laundering)
Week 11 Lecture 1. Future of Finance Including Fintech and Blockchain
Week 11 Lecture 2. Moodle Quiz 10%
Week 11 Lecture 3. MK & AFD Revision Lecture
Week 12 = Revision Week = Yahoooo!
 Types of
Organizations
 MN2002 Assessments
Details on Moodle
1- 1,400 words (excluding references)
Individual Deadline: Monday, 13th Feb, by noon
essay (20%)
(Week 5)

Covering both AFD and MK parts of the

2- Exam module
(60%)
Choice of essay type questions
 Assessments for AFD
• Moodle Quiz (AFD) 10% will be
conducted on Tuesday 14th March
2023 from 3.05 – 3.45 pm (week 8)

• Moodle Quiz (AFD) 10% will be

conducted on Tuesday 4th April 2023
from 3.05 – 3.45 pm (week 11)

ü Each Quiz will have 20 questions

ü Questions from both the lecture and required
reading list.
ü Both tests must be completed in the lecture
time in Physics Lecture Room A
For Today’s Lecture
Critical Thinking Needed!!
Finance is a branch of economics:
- Dealing with the problem of
allocating financial resources Economics
- Decision making under
conditions of uncertainty

Finance primarily deals with the

management of money and assets Finance

The study of finance addresses the Management Accounting

way individuals, pubic/state
governments and organisations
allocate and account for resources.
 Economics

The term ‘economy’

is derived from
the Greek word
‘oikonomia’
Meaning management of
household.

Dr Lori Leigh Davis, PhD, MLitt, BTech, University of St Andrews

Dr Lori Leigh Davis, PhD, MLitt, BTech, University of St Andrews
 Scarcity and Choice
1. Resources can only be used for one purpose at a time.

2. Time is the most valuable resource: it is limited and desirable.

3. Scarcity requires that choices be made.

Dr Lori Leigh Davis, PhD, MLitt, BTech, University of St Andrews

 Definitions of Economics
Broadly, on the basis of different concepts and definitions it can be concluded
that economics includes the study of:
Human beings as to how
the they coordinate wants and
the effects of the science of human desires, given the decision-
the economy coordination
scarcity choice behaviour making mechanisms, social
process customs, and political
realities of society.

Economics is the study of how humans make decisions in the face of

scarcity. Scarcity exists when human wants for goods and services exceed the
available supply. People make decisions in their own self-interest, weighing
benefits and costs.
Dr Lori Leigh Davis, PhD, MLitt, BTech, University of St Andrews
 Critical
Analysis =
Compare
Maximize and
Contrast!

Dr Lori Leigh Davis, PhD, MLitt, BTech, University of St Andrews

Dr Lori Leigh Davis, PhD, MLitt, BTech, University of St Andrews
What is a Market?

Dr. Lori Leigh Davis PhD, MLitt, BTech

 Market structure: establishes the overall environment
within which each firm operates.
What Do • 1. Number and size distribution of buyers and
sellers
Market • 2. Type of product for sale
• Whether firms in the same industry produce
Structures standardized products or differentiated
products
Help • Differentiated products are less substitutable
• 4. Barriers to entry
Economists • These reflect any increased costs that new
firms must incur relative to existing firms when
entering a particular market
Understand? • High costs deter entry
• 5. Whether any asymmetry of information exists
between buyer and sellers

Dr. Lori Leigh Davis PhD, MLitt, BTech

 Features of the Four Market Structures

Type of Number of Freedom of

Nature of product Examples
market firms entry
Perfect Homogeneous Cabbages, carrots
Very many Unrestricted
competition (undifferentiated) (approximately)

Monopolistic Many /
Plumbers, restaurants
competition several Unrestricted Differentiated

Undifferentiated Cement
Oligopoly Few Restricted or differentiated cars, electrical appliances

Local water company, gas

Restricted or and electricity in many
Monopoly One Unique
completely blocked countries
Dr. Lori Leigh Davis PhD, MLitt, BTech
Finance deals with the flows about money = cash flows
Factors of Production
The production of all of the good we desire requires scarce resources. It is the allocation of these
resources between humans’ competing wants that Economics focuses on.

Land Labor Capital Entrepreneurship

Land resources are those
things that are "gifts of
nature". The soil in which we
grow food, wood, minerals
such as copper and tin and
resources such as oil, goal, gas
and uranium are scarce
Labor refers to the human
resources used in the
production of goods and
services. Labor is the human
work, both physical and
intellectual, that contributes
to the production of goods
and services
Capital refers to the tools and
technologies that are used to
produce the goods and
services we desire. Since more
and better tools enhance the
production of all types of
goods and services, from cars
to computers to education to
haircuts, yet the amount of
capital in the world is limited,
capital is a scarce resource.
This refers to the innovation
and creativity applied in the
production of goods and
services. The physical scarcity
of land, labor and capital does
not apply to human ingenuity,
which itself is a resource that
goes into the production of
out economic output.

Economic Resources
A. Land - Gifts
B. Capital - Tools
C. Labor - Sweat
Dr Lori Leigh Davis, PhD, MLitt, BTech, University of St Andrews D. Enterprise - Risk
 Economics in an Ancient World
• Economics in its basic form began during the Bronze Age (4000-2500 BCE)
with written documents in four areas of the world: Sumer and Babylonia
(3500-2500 BCE); the Indus River Valley Civilization (3300-1030 BCE), in
what is today’s Afghanistan, Pakistan, and India; along the Yangtze River in
China; and Egypt’s Nile Valley, beginning around 3500 BCE.
• Societies in these areas developed notation systems using markings on clay
tablets, papyrus, and other materials to account for crops, livestock, and
land.
• These accounting systems, arising in tandem with written language,
eventually included methods for tracking property transfers, recording
debts and interest payments, calculating compound interest, and other
economic tools still used today.

Money Changes Everything: How Finance Made Civilization Possible - William N. Goetzmann, Princeton University Press
Dr Lori Leigh Davis, PhD, MLitt, BTech, University of St Andrews
Management Throughout History

Dr Lori Leigh Davis, PhD, Mlitt, BTEC, University of St Andrews

Source: C. S. George, Jr., The History of Management Thought (Englewood Cliffs, NJ: Prentice Hall, 1972).
5000 BC Sumerians – Record Keeping

Sumer is the earliest known

civilization in the historical
region of southern
Mesopotamia, modern-day
southern Iraq, during the
Chalcolithic and Early
Bronze ages, and one of the
first civilizations in the
world along with Ancient
Egypt and the Indus Valley.

Dr Lori Leigh Davis, PhD, Mlitt, BTEC, University of St Andrews

Economics in Ancient Times

• From the third millennium BCE onward,

Egyptian scribes recorded the collection and
redistribution of land and goods.

Source: Brian Muhs - One - The Early Dynastic Period (c. 3000–2686 BCE) Cambridge University Press: 05 July 2016
Dr Lori Leigh Davis, PhD, MLitt, BTech, University of St Andrews
 History of Management

4000-2000 BC Egyptians
Plan, organize, control and written requests
Economics in Ancient Times

• Sumerian traders
developed methods to
calculate compound
interest over a period of
months and years. The
Code of Hammurabi (circa
1810–1750 BCE), the
earliest work of economic
synthesis, specifies norms
for economic activity and
provides a detailed
framework for commerce,
including business ethics
for merchants and
tradespeople.
Source: Brian Muhs - One - The Early Dynastic Period (c. 3000–2686 BCE) Cambridge University Press: 05 July 2016
Dr Lori Leigh Davis, PhD, MLitt, BTech, University of St Andrews
 Economics and the Ancient Greeks

Hesiod 750 – 650? BC

• Ancient Greek philosopher and poet
• Contemporary with Homer
• Wrote the earliest known work on the
basic origins of economic thought
• Wrote on the fundamental of the
scarcity of resources
• Laid out precepts for managing a farm
in his Works and Days
Management Throughout History

Dr Lori Leigh Davis, PhD,Source:

Mlitt, BTEC,
C. S. University ofThe
George, Jr., St Andrews
History of Management Thought (Englewood Cliffs, NJ: Prentice Hall, 1972).
Who is considered the
‘Father of Modern
Economics’?
 Classical Management (1700s to 1850)

1. Adam Smith

¡ Classical economics
¡ Modern free market
¡ “Invisible hand”

¡ Attempts to find ways to increase output

of workers.
a) Employees have strong economic needs
which can be satisfied through financial
incentives.
b) It stresses on forma structure of jobs and work
schedules to satisfy organisational and
individual needs.
c) Division of labour (manufacture of pins)
¡ Realized that job specialization resulted in much higher
efficiency and productivity. Breaking down the total job
allowed for the division of labour in which workers became
very skilled at their specific tasks.

Dr Lori Leigh Davis, PhD, Mlitt, BTEC, University of St Andrews

 The Evolution of Management

↓Scientific Management
The application of scientific methods to increase individual workers productivity.
↓Bureaucratic Management
The use of management principles in the structuring and managing of an
organization.
↓Behavioral Management
Emphasizes improving management through an understanding of the
psychological makeup of people.
↓Quantitative Approach
Emphasizes use of a group methods in managerial decision making.
↓Contemporary Management
Numerous initiatives and ideals more closely linked to leadership.

Dr Lori Leigh Davis, PhD, Mlitt, BTEC, University of St Andrews

Henri Fayol (1841-1925)
‘The Father of Modern Management’
¡ General and Industrial Administration (1895)

¡ There are six main groups of operations in any

business:
1. Technical
2. Commercial
3. Financial
4. Security
5. Accounting
6. Administration “ To forecast and plan, to organise,
to command, to coordinate and to
control is called management.”
Dr Lori Leigh Davis, PhD, Mlitt, BTEC, University of St Andrews
- Henry Fayol
 Scientific Management (Early 1900s)
3. Frederick Taylor (1856 - 1915)
¡ Used time studies of jobs, standards planning, exception
rule of management, slide-rules, instruction cards, and
piece-work pay systems to control and motivate
employees.
¡ To improve efficiency Taylor suggested:
⇢Organize workshop on the basis of functional
specialization
⇢Carefully select workers and train them.
⇢Selecting, training, teaching, and developing workers.
⇢Find new ways for jobs to be performed .
⇢Standardize tools and equipment's.
⇢Establish fair levels of performance and pay a premium
for higher performance.
Dr Lori Leigh Davis, PhD, Mlitt, BTEC, University of St Andrews Bethlehem Steel Works
 Scientific Management (Early 1900s)

Dr Lori Leigh Davis, PhD, Mlitt, BTEC, University of St Andrews

Dr Lori Leigh Davis, PhD, MLitt, BTech, University of St Andrews
 Bureaucratic Management
Max Weber (1864–1920)
¡ His theory of bureaucracy is based on a rational set of guidelines for
structuring organizations.

¡ Bureaucracy: Exercise of control on the basis of knowledge, expertise, or

experience, rather than favoritism/birthright
¡ Characterized elements of bureaucracies
¡ Qualification based hiring
¡ Merit-based promotion
¡ Chain of command
¡ Division of labor
¡ Impartial application of rules and procedures
¡ Records in writing
¡ Managers separate from owners
ü Helped improve organizational functioning
✓Fairness replaced favoritism
✓Goal of efficiency replaced goal of personal gain
Dr Lori Leigh Davis, PhD, Mlitt, BTEC, University of St Andrews
✓Logical rules replaced arbitrary decision making
 Behavioural Management

1.Professor Elton Mayo (1880-1949)

¡ Professor of Industrial Management, Harvard

Business School, 1933
¡ Played a significant role in Hawthorne Studies
¡ Helped understand the effect of group interactions,
employee satisfaction, and group dynamics on
individual and group performance
”Any company controlling many
thousand workers…tends…to lack
any satisfactory criterion of the
actual value of its methods of
Dr Lori Leigh Davis, PhD, Mlitt, BTEC, University of St Andrews
dealing with people.”
—Elton Mayo,
Hawthorne Effect = Human Relations

Airplane View of Western Electric, Hawthorne Works, ca. 1925

Dr Lori Leigh Davis, PhD, Mlitt, BTEC, University of St Andrews https://www.library.hbs.edu/hc/hawthorne/01.html
 Behavioral Management Theorists

2. Abraham Maslow – Hierarchy of Needs (1943)

¡ DrAdvanced a theory that employees are motivated by a hierarchy of needs that they seek to satisfy.
Lori Leigh Davis, PhD, Mlitt, BTEC, University of St Andrews
 Behavioral Management Theorists
3. Douglas McGregor (1906-1964)
American professor at MIT school of Management
(1906-1964)
“The Human Side of the Enterprise” (1960)

Proposed Theory “X” and Theory “Y”

Workers can be divided into two groups,
depending on which of those theories they believe
to be true
 Quantitative
Management

• Helped Allied forces manage logistical problems

during World War II.
• Focuses on decision making, economic
effectiveness, mathematical models, and use of
computers to solve quantitative problems.
• Relies on representative mathematical models to
assist with decisions.
• Practical application of management science to
efficiently manage the
production and distribution of products and
services.
• Developed sophisticated quantitative techniques
to assist in decision making.
 Contemporary
Management

• Globalization of product and service markets

• An increasingly diverse and globalized workforce
• An emphasis on ethics and social responsibility
• The use of quality as the basis for competition
• The shift to a predominately service-based economy
• Meeting the challenges of a recovering economy
• Creating new organizational structures to provide
challenging, motivating, and flexible work environments
• The effects of new information technology on how work
is done in organization
Dr Lori Leigh Davis, PhD, MLitt, BTech, University of St Andrews
• Please Contact Me If
You Have Any Questions
–

• I Am Always Happy To
Help!

• lld2@st-Andrews.ac.uk
Notes For Your
Review
Week 6 Lecture 1. Introduction to the AFD Section of the Module
Week 6 Lecture 2. What Does Critical Analysis Sound Like?
Week 6 Lecture 3. Finance Fundamentals

Week 7 Lecture 1. Money – The History of Money and Financial Institutions

Week 7 Lecture 2. Money – Financial Systems and Markets
Week 7 Lecture 3. Personal Finance and Psychology of Money

*Week 8 Tutorial 1 Topic: Money and Personal Finance

Week 8 Lecture 1. Corporate Finance and Accounting Statements
Week 8 Lecture 2. Moodle Quiz 10%
Week 8 Lecture 3. Case Studies of Financial Scandals from Around the World

*Week 9 Tutorial 2 Topic: Corporate Finance and Accounting

Week 9 Lecture 1. Public/Government Finance
Week 9 Lecture 2. Case Studies – Finances of Different Governments
Week 9 Lecture 3. Central Bank Digital Currencies and Countries Around the World

*Week 10 Tutorial 3 Topic: Central Bank Digital Currencies

Week 10 Lecture 1. Analysis of Financial Data – A Look A Publicly Traded Companies
Week 10 Lecture 2. Social and Responsible Finance/Governance and Ethics
Week 10 Lecture 3. Case Studies from Around the World

Week 11 Lecture 1. Future of Finance Including Fintech and Blockchain

Week 11 Lecture 2. Moodle Quiz 10%
Week 11 Lecture 3. MK & AFD Revision Lecture

Week 12 = Revision Week

6 20 Feb No tutorial AFD Lecture 1 LD AFD Lecture 2 LD AFD Lecture 3 LD
Introduction What Does Critical Analysis Finance Fundamentals
Sound Like?

Vacation week

7 6 Mar No tutorial AFD Lecture 4 LD AFD Lecture 5 LD AFD Lecture 6 LD

Money – The History of Money – Financial Systems Personal Finance and
Money and Financial and Markets Psychology of Money
Institutions
8 13 Mar AFD Tutorial 1 AFD Lecture 7 LD Moodle Quiz (AFD) 10% LD AFD Lecture 8 LD
Corporate Finance and Case Studies of Financial
Accounting Statements Scandals from Around the
World
9 20 Mar AFD Tutorial 2 AFD Lecture 9 LD AFD Lecture 10 AFD Lecture 11 LD
Public/Government Case Studies – Finances of Central Bank Digital
Finance Different Governments Currencies and Countries
Around the World
10 27 Mar AFD Tutorial 3 AFD Lecture 12 LD AFD Lecture 13 AFD Lecture 14 LD
Analysis of Financial Social and Responsible Case Studies from Around the
Data – A Look A Publicly Finance/Governance and World
Traded Companies Ethics
11 3 Apr AFD Lecture 15 LD Moodle Quiz (AFD) 10% AFD 16 & MK 16 Revision LD
Future of Finance Lecture
Including Fintech and MK & AFD Revision Lecture
Blockchain
12 10 Apr Revision Week