ACST1001 - Financial fundamentals

Overview of Financial Decision Making

• Focus on developing skills to evaluate financial decisions in both personal and business contexts.

Case Study: Canva's Acquisition

• Example of Canva's investments:

  • Acquired a UK-based company for 1 billion AUD.

  • Acquired a Sydney-based company for 370 million AUD.

• Importance of financial analysis when making such transactions:

  • Tools for evaluating the impact on owner wealth.

  • Consideration of financing options for acquisitions.

Financial Decision-Making Tools

• Importance of tools useful for:

  • Evaluating investments.

  • Strategies for both large companies (like Canva) and small businesses (like cafes or family businesses).

• Wealth creation is a fundamental goal in decision-making.

Financial Considerations

• Wealth Increase: Questions to consider:

  • Does the acquisition increase the wealth of the owners?

  • If personal investments do not boost personal wealth, reconsider decisions.

• Financing Decisions: Consideration of:

  • Raising equity.

  • Borrowing from banks.

  • Using public debt markets (bonds).

Personal Financial Decisions Examples

• Investing savings:

  • Options include:

    • Spending it.

    • Saving in a bank account.

    • Riskier investments like shares.

    • Managed funds for diversified shares.

• Risk Evaluation:

  • Comparison of risk associated with different investment avenues (e.g., bank accounts vs. shares).

• Example: Purchasing a New Phone

  • Evaluate payment options:

    • Outright purchase with savings.

    • Credit card or payment plans.

Course Structure and Learning Outcomes

• Structure includes weekly content overview and expectations.

• Goals:

  • Understand finance and financial decision-making tools.

  • Application of concepts in personal and business scenarios.

• Teaching Team

  • Notable experiences from the instructor with industry background.

  • Access to teaching assistants for questions and support.

Course Format

• Lectures (90 minutes) to cover theoretical content.

• Tutorials (90 minutes) focus on practical applications of the concepts discussed in the lectures.

• Recommendations for success:

  • Attend both lectures and tutorials for maximum benefit.

  • Actively ask questions to clarify doubts.

Assessment Overview

• Assessments structured to reinforce learning outcomes:

  • Final Exam (40%): Covers weeks 1-11 content.

  • Skills Development Assessment (Excel based).

  • Weekly problem sets contributing towards reflection report (30%) due in week 10.

  • Emphasis on continuous engagement throughout the course to facilitate learning.

Key Financial Concepts

• Wealth Maximization: All financial decisions aim to maximize wealth.

• Time Value of Money: Future cash flows need to be discounted to present value for accurate cost-benefit analysis.

• Comparing Costs and Benefits: Key principle in financial decision-making; consider both potential costs and expected benefits at equivalent timelines.

Real and Financial Assets Overview

• Real Assets: Generate cash flows through physical products.

• Financial Assets: Claim on cash flows generated from real assets.

• Investment decisions include evaluating whether to invest in real assets vs. financial assets.

Key Financial Decisions for Individuals

• Consumption-Saving Decision:

  • Trade-off between present consumption and future savings.

• Investment Decisions:

  • Choose investments considering risk and return.

• Financing Decisions:

  • Use of loans or external funding for significant purchases (e.g., homes, education).

The Financial System

• Facilitates funds movement between investors and firms.

• Comprises financial institutions and markets that support investment and financing activities.

Reflections on Education Investment

• Costs: Opportunity costs, tuition fees, and incidental expenses.

• Benefits: Knowledge gained, potential for higher income, job opportunities, networking benefits.

• Evaluating education as a financial decision involves a thorough analysis of both costs and benefits over time to determine overall value.