Analysis for Financial Management (R. Higgins) Chapter 7 Summary

1. Discounted Cash Flow Techniques
2. Management converts strategic goals into  investment proposals
3. financial evaluation of investment proposals = capital budgeting
4. money is required today to achieve a future benefit
5. Do the future benefits outweigh the risks?
6. Is the proposed investment the most cost effective way to achieve the strategic goals?
7. Stock and Bond valuation
8. equipment purchases (and any other purchasing decisions, including investing in an MBA!)
9. discounted cash flow forms the backbone of modern finance
10. Steps for evaluating any investment opportunity
1. estimate future cash flows
2. calculate a figure of merit for the investment
3. compare the figure of merit to an acceptance criterion
4. figure of merit:  a number which encapsulates an investment's worth

Analysis for Financial Management (R. Higgins) Chapter 6 Summary

1. The Financing Decision
2. company's choice of the proper financing instruments
3. how much external capital is required?
1. forecasting
2. budgeting
3. estimate sales growth, need for new assets, internal capital available
4. careful consideration of capital markets

ING Direct USA (IMD-3-1845)

1. ING Groep-> ING Direct
1. Amsterdam headquarters
2. 2006 Flat yield curve
3. margin pressure
4. interest rate offered by competitors higher (Citi, HSBC, BOA)
5. difficult to maintain entrepreneurial climate
6. 1995, ING Group decided to look outside of the Netherlands

Analysis for Financial Management (R. Higgins) Chapter 2 Summary

1. Chapter 2:  Evaluating Financial Performance
2. ROE= net income/shareholder's equity.  Three determinants:
1. Net Income/Sales  *  Sales/Assets  *  Assets/Shareholders' equity.  Same as below:
2. Profit Margin  *  Asset turnover  *  Financial Leverage

Analysis for Financial Management (R. Higgins) Chapter 1 Summary

1. Analysis for Financial Management (Introduction)
2. Author Robert C. Higgins, published 2009
3. Part One of the Book (Chapters 1 and 2)
1. devoted to the management of existing resources
2. financial statements
3. ratio analysis
4. company's operating activities
5. company's financial performance
6. financial performance linked to operating strategy
4. Parts Two through Four
1. acquisition and management of new resources
5. Chapter 1 Summary:
1. accounting is a scorecard for business
2. finance interprets accounting numbers for performance assessment and future planning
3. within a company financial analysis is crucial
4. investors, creditors and regulators also rely on financial analysis
5. cash flow is a confusing notion in finance
6. it is difficult to define and measure profits
7. profitability alone doesn't guarantee a business' future
8. operations and finance are crucially linked
9. the way that a company chooses to finance its assets sets the stage for what types of investments it is able to make in the future
10. Assets=Liabilities+Shareholder's Equity 
11. list assets and liabilities on B/S in order of decreasing liquidity
12. liquidity:  speed with which an asset can be converted to cash
13. current liability or asset:  expected to be converted to cash within one year
14. long term:  greater that one year
15. net income = earnings = profits
16. Income statements divided into operating and non-operating segments
17. accrual principle of accounting: revenue recognized when work is complete and a reasonable assurance that payment is on the way
18. This can lead to a lag-time between when revenue is recognized and when cash actually flows into a business
19. "depreciation allocates past expenditures to future time periods to match revenues and expenses" p13 top
20. companies typically keep two sets of records
1. records for tax purposes
2. records for managing the company and reporting progress to shareholders
21. constructing source and use statements:
1. place two balance sheets for different dates side by side.  Note changes in accounts over the period
2. group changes into cash generating and cash consuming
3. companies source cash by:
1. reducing an asset- eg- selling used equipment
2. increasing a liability- eg- bank loan
4. companies use cash by:
1. increasing asset- production of inventory
2. reducing a liability- paying off a bank loan
22. leveraged recapitalization :
23. cash flow statement expands on the source and use statement
1. add back depreciation and amortization to net income
2. add changes in current assets and liabilities ("noncash charges")
3. Net Cash flow = net income + noncash items = "cash earnings"
4. Operating Cash flow = Net Cash flow +/- changes in current assets and liabilities
5. Free Cash flow = OCF-CAPEX (approximately)
6. Discounted Cash flow = money today with the same value as a future stream of cash receipts
24. Value Problem:  Market vs. Book
1. financial statements are transactions based
2. objective valuations of many current assets do not exist
3. the value of intangible assets becomes a factor when a company is bought for more than its book value

Strategic Management (Case Group)

1. What aspects of Apple's strategy can you identify?
1. continuous innovation:  ipod, iphone, itunes
2. Mac as the core product
3. Apple TV
4. "Think Different"
5. Embodies Apple
6. Customer Experience
2. Analyze the industrial considerations underpinning Apple's strategy.
1. Strategic advantage derrived by improving the PC-> Mac
2. Creation of a premium prand
3. Manufacturing capability, supply chain capability
1. Chinese and Taiwanese suppliers
4. Apple contains the product in a package
5. PC Market structure- Lenovo puchased IBM - fewer competitiors
6. Substitutes for PCs, Ipad, portable devices
7. Global financial crisis- external environment
8. Final Cut Pro, Life:  Opened up OS so that developers could use their ecosystem.
3. What industry determinants have Apple been able to shape?
1. Vertical integration
2. strong supplier relationships
3. cross over collaboration and partnerships
4. What implications does Job's passing have for Apple's strategy?
1. Dynamic character
2. Tim Cook leads to a Charisma vacuum
3. PC sector dependency->  move from one sector to another such as Apple TV
4. shift to service
5. educate customers to like the Apple brand
6. Apple persuades customers to embrace the brand
7. Steve Job's core strategy was product based.  Would they be able to sustain
5. What scenarios exist for Apple?
6. What recommendations would you give, as a strategic consultant to the Board of Directors of Apple for the long term sustainability of their current market leadership?

Strategic Management (Brad Mackay)

1. Peer review:  Part of the class grade
2. Book is optional, but useful for the exam
3. Open Exam, but no
4. Exam:
1. Role Play:  What would you do in a given situation
2. Presentation
5. Guest Speaker, Rod Woodward:  Friday 25th
6. Business in society
7. Strategy in multi-business firm
8. Disruptive Strategy
9. Turn-around strategy
10. Question:  Just large corporates, no small business
11. Peer Review Grading
12. Google Case 
13. What is Strategy?
1. Tactics vs. Strategy
2. Michael Porter's Generic Strategies
1. compete on cost
2. differentiated
3. From the outside pattern of decisions
1. implies outsider point of view
2. implies consistency (not all businesses have this)
3. academia such as economists
4. Big Picture
1. not detail oriented
5. Stabilizing force for organizations
1. implies value similarities
2. Case of Japanese companies
3. What relationship must exist between strategy and culture
14. What do you think strategy is?
15. History and Background
1. Strategos- ancient Athenian position 508 BC
2. Statos-  military formation
3. Von Clauswitz 1976
4. von Newman and Morgenstern 1944
5. Glueck 1980
6. "discursive structure"- complicated way to say "communication"
16. "Aim your actions towards your purpose "
1. unification of employee efforts
2. create an identity, hew out a place in the marketplace
3. clear statement required
4. Pixar, Ikea
17. Objectives versus vision. SMART objective creation
1. Specific
2. Measurable
3. Achieveable
4. Relevant
5. Time-bound
18. UEBS vision
19. Mission Statement-  "Why we exist"
1. indicative-  what we are
2. declarative-  we declare that this is what we will do
20. Four C's of strategy:
1. Culture
2. Content
3. Context
4. Cognition
21. Strategic Fit
22. Group Discussion Questions
1. What aspects of Google's strategy can you identify
2. What is their purpose?
3. What is their vision and how important is this to their strategy?
4. What is their mission?
5. Group 10:  Room 18
23. Apple Case Discussion (from 2pm)
1. Porter Five Force Model- based on assumption of Perfect Competition
2. Barriers preventing others from entering a business
3. Potential of Substitutes
4. Supplier power- cost of inputs
5. Buyer power
6. Michael Porter
7. Business Level External Analysis
24. Porter's balance of forces is similar to a force balance in Physics
25. Iphone was a disruptive and innovative device
26. Blue Ocean Strategy
1. Cirque Desole
27. Ansoff 2X2 Matrix
1. Market Penetration/Consolidation
2. Product Development
3. Market Development
4. Diversification