Transcript careers

The Finance Sector & Careers
A Discussion
Pank Agrrawal, Ph.D.
Astt. Prof. Finance
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The Financial Services Sector
Career Opportunities
Sub-groups within the sector
Globalization
Some search sites
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Why study finance?
$’s facilitate transactions, but money
itself can be transacted, what is its
price?
Why go to work?
Why invest?
Invest in what - education, health,
stocks, bonds? All? Now?
Local stocks, national stocks or
global stocks? How? Where?
Why not bonds?
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Why ask why?…
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How do I value stocks/bonds?
Go to
or
Look at what?
If T-bond rates go up – T-Bonds do
what? And the US $?
Points on a mortgage sound good.
Really?
Should I borrow to start my
business? At what rate?
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Simple Complexities of Finance: 3 Questions
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If your initial investment declines by 50%,
what percentage increase will bring you back
to even? +50%, +49%, +51%, +100%,
+200%
If the average annual returns for the past two
years has been –50% and +50%, what is the
return on your investment over those two
years? –1%, 0%, –25%, -75%, +11%,+25%
If your investment has trebled in value, what is
the associated percentage rise? (1% =1/100)
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Finance sub-specializations
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Financial Intermediaries: Banking
Corporate Finance: Managing the
financing of corporations
Investment Management: Portfolio
Management
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PA:
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Finance as % of US GDP
1998
gdp=$8.5T
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2005
gdp=$12.5T
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1T=10^12=10
00B=1000*1000M
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http://www.bea.gov/
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Types of financial institutions
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Commercial banks - Citibank
Investment banks – Goldman Sachs
Mutual savings banks
Credit unions – University CU
Pension funds – Corporate PFs
Life insurance companies – Met Life, NY Life
Mutual funds – Fidelity, Vanguard, Schwab
Hedge funds - Bridgewater, DE Shaw, Citadel
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Hedge Funds $ 1.5 Trillion Sub-industry
Historically the stock market
value has been about 58% of
GDP. Lows were in the range of
37% in the early 1950s, and
25% at the bottom of the Great
Depression. Today the rate is
around 100% ($13 Trillion)
Citadel, Campbell
From: Wikipedia.com
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Finance Jobs
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Financial Management Issues
of the New Millennium
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The effect of
changing technology:
lower costs, efficient,
barriers to entry
lowered
The globalization of
investing –
cointegration – EWA,
EWT, IFN, EFA, SPY
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EWO, EWT, IFN, EFA, SPY, EZA, GE
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Relevance of Finance and
Globalization:
If you are a Doctor / Engineer– how does FM
affect you?
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For self decisions – day to day
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Good business organization
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If you are a Nebraska Homebuilder– how does
Globalization affect you?
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Local economy – wheat demand - global
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Interest rates –global- housing demand
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USD vs EUR, INR
http://finance.yahoo.com/currency
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Percentage of Revenue and Net Income
from Overseas Operations for 10 WellKnown Corporations
Company
% of Revenue
from overseas
% of Net Income
from overseas
Coca-Cola
60.8
35.9
Exxon Mobil
69.4
60.2
General Electric
32.6
25.2
General Motors
26.1
60.6
IBM
57.9
48.4
JP Morgan Chase & Co.
35.5
51.7
McDonald’s
63.1
61.7
Merck
18.3
58.1
3M
52.9
47.0
Sears, Roebuck
10.5
7.8
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Responsibility of the Finance
Staff
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Maximize stock value by:
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Forecasting and planning
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Investment and financing decisions
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Coordination and control
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Transactions in the financial markets
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Managing risk
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Decision making in Finance
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Decisions made by financial managers:
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Investment decisions [which project,where]
Financing decisions (the relative use of debt vs
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Policy decisions
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equity financing)
taxation]
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[retained earnings use, dividends,
The external environment [no control]
ceteris paribus – not a bus in paris
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