Business and Investment Essentials

Bio Overview Help Prerequisites Materials Assignments Grading Schedule

Summer at Stern program has been discontinued. Please do not contact me regarding this program.

Overview

Course code: MULT-UB.0275.60

Please note that I do not administer this course. Therefore, for all administrative issues such as registration, permission codes, and whether this course will count towards university credit, please contact university.programs@nyu.edu.

Visit http://www.dangode.com/essentials/ for an up-to-date version of this web page.

This course is for rising high school juniors and seniors.

The course teaches you important business and financial skills critical in your personal and professional life. It covers the trade-off between consumption and savings, the time value of money, and the trade-off between risk and return, the basics of capital markets, and the basics of financial statements. All concepts are taught via practical examples using in-class simulations and make heavy use of Excel.

This course covers five critical areas listed below. It also teaches life lessons about understanding how and why career choices affect financial outcomes. Since all of the topics below are taught using hands-on examples using Excel, you will leave the course with a very good understanding of how to use Excel in Business, Finance, Economics, and Statistics. Many assignments use an advanced online system to give you instant feedback as you work through the homework assignments.

Personal finance: Time value of money, personal financial planning, and borrowing, the risk versus return trade-off in investments in stocks and bonds, pricing in competitive financial markets
Understanding businesses and building business plans and models: Income statements and margins, Balance sheets and funding needs, projecting size, growth, margins, net asset intensity, and risk
Capital markets: Public offerings, financial reporting, basic valuation ratios
Basic statistics: Mean, median, mode, variance, standard deviation, covariance, correlation
Economics and market design: Double auction markets, sealed-bid auctions, private value versus common value auctions, public goods auctions, moral hazard, and adverse selection. This topic is taught via in-class market simulations rather than traditional theory.

Prerequisites

As a high school student, summer must be fun and educational. You will find the course fun if you like working with numbers; otherwise, you will struggle with this course. If you liked algebra in school, you would enjoy this course. However, the course does NOT require advanced algebra, calculus, geometry, or trigonometry.
You will be using a computer with Microsoft Excel and a wireless internet connection in every class. For the classroom sessions, a computer will be provided for all students in the course. If you prefer, you are welcome to bring your computer. If you want to bring your own, either Mac or Windows is OK, but Windows is preferred because Excel works much better on Windows. I will be using Excel on Windows in class. Your computer must have Microsoft Excel (2010 or higher) and connect to a wireless network. Stern will provide you the user id and password to connect to the Stern network.
Previous experience with Excel is not required. You will be taught the necessary skills in class.
You will be doing Excel-based assignments outside class as well. Stern will provide you a computer only during class. Outside class hours, you will be able to use computer labs at NYU or use your computer if you have one.
The class relies on your participation. Attendance is mandatory. Eating/drinking in class, checking phones/email is prohibited.

Help and Office

Me: dgode@stern.nyu.edu, 212-998-0021, Office: KMC 10-86.
Teaching assistant: TBD

Materials

I will not require a textbook. I will distribute materials in class.

Assignments

The details of assignments will be discussed in class. Many assignments will require spreadsheets.
http://www.almaris.com/assess/

Grading

Students will be evaluated as follows:

Class participation: 30%
Weekly assignments: 30%
Final exam: 40%

Schedule

Class	Topic
1.	Personal finance: Time value Why is there a time value of money How does the current cash balance grow at a compounded rate into the future Computing the future value of current cash flows using a compound rate Computing the present value of future cash flows using a discount rate What is the difference between the Annual Percentage Rate and the Annual Percentage Yield? Why do banks and credit card companies quote one versus the other Excel functions to implement the above
2.	Personal finance: Borrowing money What are the good reasons for borrowing money? What are some of the bad reasons for borrowing money? How can one avoid having unbearable debt by ensuring that the borrowing is only for investment, not consumption? Why is making a budget important for staying within one's means? What are the elements of a budget? How does it aid in planning personal finances? How do the following loans work? How should one avoid being ripped off by them? Credit cards (and how they differ from debit cards) Student loans Store loans Car loans Mortgages How does one prepare a table showing when and how much will a loan be paid off? Excel functions to implement the above
3.	Personal finance: Risk versus return of various investments How do stocks differ from bonds? Which one is riskier? Why? What are bonds? What do face value, coupon rate, maturity mean? What is the difference between coupon rate versus yields? What is the difference between face value versus price? How does one build an amortization table for a bond? What are common shares? How do they differ from preferred shares? What does expected return mean? For stocks, what is the difference between capital gains and dividend yields? For bonds, what is the difference between capital gains and interest yield? How is risk measured? What is the difference between default risk and inflation risk? Why is there a connection between risk and expected return? What kind of risk is rewarded with a higher return? What kind of risk does not matter? Systematic risk versus unsystematic risk Why is it hard to make money in financial markets? How do expectations affect prices?
4.	Capital markets: Public offerings and secondary markets, Who runs a company? What do boards of directors, CEO, CFO, and COO do? What are initial public offerings? What are secondary offerings? What do investment bankers do? How do companies report their financial results to investors? What is an annual report? What is a 10K? What is a 10Q? What is a prospectus? Why are financial reports audited? Who audits them? Who sets the rules that financial reports must comply with? Economics of incentives: Unobservable actions and private information Moral hazard and unobservable actions: How companies use incentive plans to overcome moral hazard, how does auditing reduce moral hazard Adverse selection and private information: What role do investment bankers play in mitigating adverse selection?
5.	Basic statistics Population versus sample Mean and median Variance and standard deviation Covariance and correlation Excel functions
6.	Business plans and models: Understanding how businesses make money What is the difference between income flows versus cash flows? Why are some cash flows never income flows? Why do some cash flows differ in timing from income flows? What do terms such as margins, gross profit, EBITDA, EBIT, and net income mean?
7.	Business plans and models: Understanding why businesses need money How does the time lag between spending cash and receiving cash drive the need for money? What are different types of assets and liabilities? How do businesses raise money? What is the difference between raising money from lenders versus shareholders? Business plans and models: Size, growth, and margins What are the benefits and challenges of running a big business? What are economies of scale and economies of scope? What are the challenges of growing a business? How do pricing power, operating efficiencies, and buying power affect margins?
8.	Business plans and models: Assets needed and liabilities available How does the difference between revenues and receipts give rise to receivables and advances? How does the difference between expenses and payments give rise to prepayments and payables?
9.	Business plans and models: Free cash flow generation How do net assets affect cash flow generated and funding needed? What do terms such as working capital, fixed capital, and invested capital mean? Business plans and models: Business risk and the uncertainty of cash flows What drives business risk? How does business risk affect borrowing capacity?
10.	Business plans and models: Financial risk, leverage, liquidity Why do some businesses have more debt than others? How does leverage amplify risk? How does liquidity mitigate risk?
11.	Market design and economics The critical role of markets in allocating resources Demand and supply in action: In-class simulations of market mechanisms below: Open outcry Double auctions Sealed bid auctions Private value versus common value: Winner's curse Public goods and the failure of markets
12.	Exam