1-1 The Finance Sector & Careers A Discussion The Financial Services Sector Career Opportunities Sub-groups within the sector Globalization Some search.

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The Finance Sector & Careers A Discussion

The Financial Services Sector Career Opportunities Sub-groups within the sector Globalization Some search sites

Pank Agrrawal, Ph.D.

Astt. Prof. Finance

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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?… 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

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

Financial Intermediaries: Banking

Corporate Finance: Managing the financing of corporations

Investment Management: Portfolio Management

1-6http://www.bea.gov/

PA:1998 gdp=$8.5T

2005 gdp=$12.5T

1T=10^12=1000B=1000*1000M

PA:1998 gdp=$8.5T

2005 gdp=$12.5T

1T=10^12=1000B=1000*1000M

Finance as % of US GDP

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Types of financial institutions

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)

From: Wikipedia.comCitadel, Campbell

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Finance Jobs

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Financial Management Issues of the New Millennium 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?

For self decisions – day to day

Good business organization

If you are a Nebraska Homebuilder– how does Globalization affect you?

Local economy – wheat demand - global

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 Well-Known Corporations

7.810.5Sears, Roebuck

47.052.93M

58.118.3Merck

61.763.1McDonald’s

51.735.5JP Morgan Chase & Co.

48.457.9IBM

60.626.1General Motors

25.232.6General Electric

60.269.4Exxon Mobil

35.960.8Coca-Cola

% of Net Income from overseas

% of Revenue from overseas

Company

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Responsibility of the Finance Staff Maximize stock value by:

Forecasting and planning

Investment and financing decisions

Coordination and control

Transactions in the financial markets

Managing risk

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Decision making in Finance

Decisions made by financial managers: Investment decisions [which project,where] Financing decisions (the relative use of

debt vs equity financing) Policy decisions [retained earnings use,

dividends, taxation]

The external environment [no control] ceteris paribus – not a bus in paris