Bbc 13 04

Investment and portfolio management

Agenda

• Financial statements • Why people invest :• Investment Goals • Required Rate Of Return• Capital Markets • Stock Issuing • Debt• Risk Management

Financial statements

• Balance Sheet • Income statement • Cash flow statement• Shareholders equity statement• Notes

• Example : Differences Between – Company Balance sheet – Bank Balance Sheet

• Differences Between Assets & Financial assets:– Assets ( Land , building , equipments , goodwill ) – Financial Assets ( T-bill , T-bond , Stocks , Currency

, derivatives ) • Bank portfolio : Is an allocation of financial assets

Financial statements

Why people invest :

• Maximizing Value • Inflation ( time value of money )

Investment Goals

• Near-term, high-priority goals• Long-term, high-priority goals • Lower-priority goals

Required Rate Of Return

• K = Rs = RFR + B ( MRP ) • K = Rs : Required Rate Of Return • RFR : Risk Free Rate ( T- bond )• B : Beta = sensitivity to movements in

the relevant market

• Assume the company has a beta coefficient of 1.2, that the risk-free rate (the yield on T-bonds) is 7.0%, and that the market risk premium is 5%. What is the required rate of return on the firm’s stock? 7 % + 1.2 (5 %) = 13 %

Required Rate Of Return

Capital Markets :

• Get Finance • Exit Strategy

Stock Issuing :

Primary Market

Issuer company Underwriter

Investor

Regulations

IPO Private Placement

Stock Issuing :

Secondary Market

Stock exchange

Brokerage firm

Corporate events

Debt

• (Debt Instrument ) Companies Issuing Bonds to Borrow money from investors and promised to pay it back at a certain rate of interest.

• Example :– Interest At Maturity ( Deposits ) – Amortized Cash Flow ( Cars ) – Bond Time Line– Fixed and Floating

Debt

• Rating Agency : Moody's , S&P :– The Rating Reflect The Credit Worthiness of the

Issuer .

Risk Management

• Risk is The uncertainty that an investment will earn its expected rate of return .

• Types Of Risk :– Country Risk ( Political ) , Business Risk . Financial

Risk ( Leverage ) , Liquidity Risk & Exchange Rate Risk .

Risk Management

• Relationship between risk and return

Risk Management

Risk Management

• Basel 1 , 2

• اليوم العالم• المال

• Mubasher .info• Amcham.org.eg• CFAinstitute.org• Eima.org.eg• egx.com

Thank You

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