[SOUND] Welcome to Corporate Finance II: Financing Investments and Managing Risk. My name is Heitor Almeida, I'm a professor of corporate finance at the University of Illinois at Urbana-Champaign, and I've been teaching corporate finance to MBAs, PhD students and undergraduates since 2001. I also do research, and in particular, I research corporate finance topics that we are going to discuss in this course, such as risk management, capital structure, pay out policy. You're actually going to see several of my papers showing up as discussion topics for Corporate Finance II. So this is very exciting to me to be able to share my research with you as well. What we're going to do in this course is to learn how companies finance investments and then manage the risks associated with these investments. So the two big topics are financial management and risk management, financing and risk management. Some of the specific issues that we are going to study are, how much debt a company should have. How can we determine the optimal leverage ratio? How would a company choose between bank debt and public debt bonds? How to set a payout policy using dividends and share repurchases that creates value for shareholders. How to manage risks using derivatives but also other tools, such as liquidity, purchase obligations and some other topics we're going to talk about in module three when we get to risk management. And finally, what we're going to do in module four is to use all the theory all the examples that we develop in the first three modules to construct financial management plans for M&A deals and R&D programs using data from real world companies. So, module four is really going to be the point at which you can apply what we learn to some real world examples, some cases about real world companies. So, make sure you get to module four. This is the structure by the way. We have four modules. We are going to start talking about capital structure, then we are going to go deeper into debt financing and payout policy, move on to risk management and finish with the case studies that I just mentioned about acquisitions and R&D, okay? Let me relate this course to Corporate Finance I. I'm sure this is something that you have on your mind. How does this course relate to the previous one, this is the follow up, right? So in Corporate Finance I, we studied how companies make investment decisions that create value for shareholders. So really the focus on Corporate Finance I is more on spending cash. How can we determine whether a company should spend cash in a project, for example. Whereas, in Corporate Finance II the focus is on raising cash. And also paying out cash to shareholders. So, for example, in Corporate Finance I, we talked about how to measure the contribution of a new project, or acquisition to shareholder value, or how to incorporate risk and uncertainty into investment decisions. In this course, we're going to talk about issues like capital structure, pay out risk management, which is more on the financial side. So Corporate Finance I is about investment, spending money, Corporate Finance II is about financing risk management. Can you take Corporate Finance II without having taken Corporate Finance I? The answer, of course, is yes, it's up to you, the course is open. I would like to say, though, that it's not ideal, because I am going to use tools and concepts that we also discussed it in Corporate Finance I, such as net present value, financial planning models, and other concepts as well. So I would, it would be better if you could take both courses. However, I understand some of you may be more interested in Corporate Finance II, or you may have some background already. What I'm going to do, to make it easy for you is, every time I use a concept or idea developed in Corporate Finance I, every time I draw in an example from that course or I draw in a concept that we studied in Corporate Finance I, I will try to state it explicitly in the slides. And then point out to a specific module in Corporate Finance I where you can go back and review that material. Okay, so that way I think you can easily go back and look at what you need, learn what you need, and then go on with Corporate Finance II. I think it won't be too painful to go back to Corporate Finance I. You know, this is actually a very highly rated finance course on Coursera. This data come from about October 2016, we had 171 ratings exactly. And we got a rating of 4.7 out of 5. Thank you for all of you who have rated the course, shared your stories, you know there is an example here for you. You know, thank you for helping out with this, really the marketing aspect of the course. Of course, I'm very glad to see that you enjoyed Corporate Finance I. And I hope you're going to enjoy taking this course, best course as well. If you are just thinking about whether to take Corporate Finance II, maybe you want to take Corporate Finance I as well. So what are some of the issues that we're going to borrow from Corporate Finance I? You're going to see that we're going to use lots of real world examples. So it's not just theory, it's not just examples from textbooks. I'm really going to draw on examples from financial management that real world companies, and try to dig into data, try to understand what these companies are doing, and see what we can learn from these examples. So, these are just five different companies that we're going to talk about in the course, but there are many more. And when we talk about real world companies, for example, here you have AT&T, we are really going to get into the real data. I'm not going to massage the data, or change things, or make it easy for you, I'm really going to draw the data directly from financial statements and give it to you so you can look at the data, learn where to get data, how to read financial statements, and how to use them to do financial management for real world firms. There is also going to be time for questions. If you took Corporate Finance I, you might remember that there are many questions that I introduced in the videos, right where we stop the video and we allow you to think about the question. Spend some time reflecting, going back to the earlier material, trying to answer questions, I think that's an important part of the learning. However, there are also some new things. There's some exciting new things. As I mentioned before, there's going to be a greater focus on research. As it turns out, even though both Corporate Finance I and Corporate Finance II, both investments in financing are extremely important topics, most of the research in corporate finance actually focus on financial management. So, as you're going to see, we're going to draw on a lot of the most updated research on issues like capital structure, payout, risk management and really bring them to this course. And to see what we can learn from researchers. And I'm promising you, there is going to be a lot that we can learn from recent research that is going to improve the way that you can do financial management in the real world. So very practical applied research, but very solid and careful research as well. The other new thing we have is we have a couple of interviews with small business owners. We're going to interview the owners of two local companies here in the Champaign-Urbana area. One is Analog Outfitters, the other one is Nona Incorporated. And the reason we are doing that, there are really two reasons. The first reason is that these interviews are going to give you a perspective from small business. Most of the examples that we talk about in this course, like AT&T, some of those pictures you saw in the previous slide, are examples from large companies. And I think it's very useful for you as well to think about the same issues in the context of a small business, like Analog Outfitters, for example. In addition to that, of course, these businessmen are going to bring the real, real world, right? I mean, I'm using real world data as much as I can. But hearing a business owner talking about financial management in his or her own company really adds another layer to this. So I hope you enjoyed the interviews. I have made a couple introduction videos that point out to specific questions and issues that you can think about as you watch these interviews. On my end the news is. See I'm not a very good in form of football. I would play better with my feet, but you know. On my end the news is that I got another teaching prize from my executive MBA students. Which almost broke my nose. [LAUGH] So I got another teaching prize, it's a football that is signed by the students. If you saw Corporate Finance I, I got a basketball that time. So after I got the prize I was joking with the students that maybe one day they'll give me a soccer ball. Then I can do some better [LAUGH], I'm going to have more skills with that, given that I'm from Brazil, so I haven't really played football when I was a kid [LAUGH]. Back, yeah I did that better, right? So, what about you, please, you know, we have the discussion board, feel free to share with us what you expect from the new course, what's going on in your business life. You know, the discussion board is open for you to contribute to talk about yourselves as well. So I hope we have a good time exchanging information on the discussion board. There are several quizzes and assignments. This is similar to the previous course. But there is a slight difference here that I want to talk about. Each module is going to have three sets of problems. There are practice quizzes that have solutions with feedback. And then there's going to be an end of module quiz that you have to complete in order to pass the course. And then, finally, there is an end of module assignment with solution. But here there are a couple changes. First of all, these assignments are required only for honors track. So, you can pass the, you can get the Coursera certificate without taking this end of module assignment. Of course, I do recommend that everybody takes it. because I think it's going to add a new layer of learning if you go through these more in-depth assignments after you go through the modules. But, if you don't have time, or if you just want to take the module quiz, you have that option as well. So we have these new, a track which we call the honors track, which is what you get if you take both the quizzes and you take the assignments. The other changes that there are only two assignments. So we are trying to make it easier for students to work on the assignment. So rather than four assignments we have two assignments on Corporate Finance II. Okay? And please try to work on all these examples as carefully as you can, because, as you know, practice makes perfect. So the more you practice financial concepts, the more you think about it, the more problems you solve, the better you will get in financial management. >> [SOUND]
