Introduction to Finance • Finance is a broad term that is used regarding the management, creation,

and study of money and investment ◦ Public Finance – study of tax systems, government
expenditures, budget procedures, and government debt ◦ Personal Finance – individual and
household budgeting, mortgage planning, savings, and retirement planning ◦ Corporate Finance –
Managing assets, liabilities, revenues, and debt • This course will focus mostly on topics in corporate
finance, but will touch on some extensions to personal finance 1.1 What is Finance? • Economics
tells us the goal of a firm is to maximize profits ◦ How do firms measure these profits? – We will look
at different metrics to evaluate profits ◦ How do firms account for risk? – We will discuss how firms
evaluate risk in decision making ◦ How do firms compare money they will receive today compared to
money they will get in the future? • How do managers and investors evaluate the success of a
company? ◦ This is not as simple as just looking at profit 1.2 Accounting vs Finance 1.2.1 Accounting •
Accounting is the recording, maintaining, and reporting of a companies financial records 6 SECTION
1. INTRODUCTION TO FINANCE Business Finance • Companies prepare financial statements ◦ Balance
Sheet ◦ Income Statement ◦ Statement of Cash Flows • Accounting statements are just bookkeeping
and can be misleading ◦ Inventory valuation (e.g., FIFO, LIFO, etc.) ◦ Depreciation methodolog