Overview

Finance makes the world go around. It helps to raise money for new companies, allocate capital to projects, and provide loans to credit-worthy industries. Finance is also the glue that holds companies together - in charge of the annual budgeting and forecasting processes; when the FP&A department sends you an email, you should respond. Finance is way to assess projects by factoring in the estimates of future cash flows, the risks, timeframe, alternatives, and making smart decisions about money. Any competent executive - whether in Marketing, Sales, Technology, or HR - needs to know that finance basics. Learn the top 20 concepts simply: Time value of money, NPV, DCF, IRR, Comps, discount rate, WACC. Even if you are not a finance-major, you need to know the basics. You need to be able to hold a conversation about finance without losing your cool. Finally, learn the basics of personal finance. Earn money, save, invest, and enjoy.

Syllabus

What is finance?

When someone says "I work in finance", that can mean many different things. It may mean they work in financial services - banking, insurance, payments, or investments. It may mean they work in a company in the Finance department: FP&A, Treasury, Corporate Finance, Accounting, Tax, Accounts payables etc. Find out the different "buckets" of finance.

Corporate finance, interest rates, inflation, time value of money

Corporate finance helps us make smart money decisions about raising capital, allocating capital, keeping liquidity. It's all based on the simple observation that there is opportunity cost with our time and money. Money today is worth money in 3 years because of a) opportunity cost b) inflation c) repayment risk. Some inflation is expected because it comes with economic growth, you don’t want too much. We need to "discount" future cash flows back to the present time; think of the future value of money like a bucket full of water, where the "discount rate" is a hole where the water leaks out.

Valuations in 3 flavors: DCF, Comps, Multiples

Valuations = determining the worth of something. This is super important to companies (e.g., investment banking, technology startups) and also individual decision-makers (e.g., buying a house, comparing job offers). It's an art AND a science. It requires lots of assumptions, potential ranges of outcomes, and good excel modeling practices. Three big ways to triangulate a valuation range are a) discounted cash flows b) comparables analysis c) multiples analysis.

Investment returns and risk

Investments are a huge industry (think: mutual funds, ETF, investment advisors, sovereign wealth funds, venture capital, private equity, commercial banking, investment banking). It's also a competitive market where vendors are continually telling you how they can GET BETTER RETURNS. One key takeaway is "there is not free lunch." If you want better-than-average returns (e.g., alpha), then you need to aware of, and willing to deal with the risks too.

Personal finance = "show me the money"

Personal finance is incredibly important because it directly affects your quality of living NOW (as you save, and don't spend) and quality of living LATER (retiring early, don't need an alarm clock). Generally, financial advisors strongly recommend that you invest steadily (dollar cost averaging), start investing early (get the power of compounding), and remain diversified across asset classes (don't put all your eggs in the same basket). If you can earn a lot, save a lot, invest consistently, and manage your spending expectations = you will retire early and enjoy it. Trust me.