Fundamentals of Finance

Go to Course: https://www.coursera.org/learn/finance-fundamentals

Introduction

### Course Review: Fundamentals of Finance on Coursera If you’re looking to enhance your understanding of corporate finance, Coursera’s **Fundamentals of Finance** course, taught by esteemed Professor Jessica Wachter from Wharton, is an excellent choice. This course is ideal for both newcomers seeking foundational knowledge and professionals desiring a refresher in key financial concepts. #### Overview The course is tailored to encapsulate crucial insights that are typically part of the pre-term qualifying curriculum for MBA students at Wharton. It dives deep into the essential principles of corporate finance, including Net Present Value (NPV), fixed income valuation, equity valuation, and the distinctions between NPV and Internal Rate of Return (IRR). #### Course Structure The curriculum is broken down into four comprehensive modules, each focusing on pivotal finance concepts: 1. **Module 1 - Introduction and Net Present Value (NPV)**: The course kicks off with an exploration of NPV, a cornerstone of corporate finance. Learners will grasp the core principles of present value, how to calculate NPV, and compare simple versus compound interest, as well as understand annuities and perpetuities. These concepts are the bedrock for making well-informed financial decisions within any organization. 2. **Module 2 - Fixed Income Valuation**: Building on the basics, this module shifts to fixed income assets. You’ll explore bond valuation, the yield curve, and critical differences between yield to maturity and holding period returns. Understanding these topics equips learners to make savvy investment evaluations. 3. **Module 3 - Equity Valuation**: This segment focuses on determining the value of stocks, emphasizing present value methods and cash flow analysis. You’ll learn about equity as a stream of cash flows, gaining insights into how to assess and value equity correctly. 4. **Module 4 - NPV vs. Internal Rate of Return**: The final module solidifies your understanding by contrasting NPV with IRR. You’ll explore common misconceptions regarding IRR and receive guidance on how to make essential financial decisions based on these two valuation metrics. 5. **Optional Additional Course Topics and Resources**: This section provides extra reading material and resources for those looking to delve deeper into finance. #### Why You Should Enroll The **Fundamentals of Finance** course is not only thorough but also presented in an accessible manner. Professor Wachter’s expertise shines through her engaging teaching style, making complex concepts easier to digest. The course balances theory with practical applications, ensuring that learners can implement their knowledge in real-world scenarios. Whether you are beginning your journey into corporate finance or looking to refine existing knowledge, this course is a valuable asset. It provides a framework for understanding essential financial metrics that are crucial for both personal finance management and corporate decision-making. ### Recommendation I highly recommend the **Fundamentals of Finance** course on Coursera to anyone interested in mastering finance fundamentals. The structured approach, coupled with in-depth instructional videos, quizzes, and hands-on assignments, makes this an incredibly worthwhile investment in your education. It’s a course designed to elevate your financial acumen whether you aim to advance your career in finance, manage your personal investments, or simply understand the financial world better. Enroll today and take your first step towards financial mastery!

Syllabus

Module 1 - Introduction and Net Present Value (NPV)

This module was designed to give you foundational knowledge of corporate finance and the Net Present Value (NPV). You’ll identify the definition of both Present Value and NPV, why it works, and how to calculate the NPV. You’ll learn key concepts such as Separation Theorem, whether corporations should follow the same rules of NPV as individuals, and what are reasonable assumptions to make when calculating NPV. You’ll compare Compound versus Simple Interest, define important concepts such as Annuities and Perpetuities, and analyze Annual Percentage Rate (APR) and Effective Annual Interest Rate (EAR). By the end of this module, you’ll gain a better understanding of the fundamental concepts in corporate finance as well as broader knowledge regarding the factors that go into a firm’s most critical decision-making.

In this module, you’ll examine fixed income valuation and delve deeper into the yield curve. Using the basic definition of bonds, you’ll be able to identify zero coupon bonds and calculate the return on those bonds. You’ll also discuss the differences between Yield to Maturity and Holding Period Returns, evaluate your investments, and be able to answer the question: “What does return on investment mean?” Through analyzing the Yield Curve, you’ll assess the opportunity cost of receiving money at various events in the future and accurately value investments. By the end of this module, you’ll be able to describe what a bond and zero coupon bond is, calculate the return on those bonds, and calculate a Yield Curve to better assess the value of your investments.

In this module, you’ll examine how to determine the value of stocks using present value methods. You’ll define what Equity is and develop an understanding of the important difference between fixed-income securities, such as bonds, and equity cash flows. You’ll discover the standard approach in valuing equity through its cash flow and how the principle of using multiples (such as price-earnings ratio) to value equity all comes from valuing equity as a stream of cash flows. By the end of this module, you’ll gain a better understanding of the theoretical basis behind applications of equity valuation and create models that determine dividend growth.

This module was designed to show you the difference between NPV and Internal Rate of Return (IRR). You’ll first explore both Internal Rate of Return and how it compares to the NPV, then debunk some of the common assumptions about IRR that may seem unrealistic when examined closely. Using hypothetical examples of projects, you’ll compare the values of NPV and IRR and what to do when they agree or disagree with each other. By the end of this module, you’ll gain a better understanding of the difference between NPV and IRR, plus be able to determine when to make the critical call on which value to accept or reject when making important decisions within your firm.

This module contains additional course topics related to the fundamentals of finance