6.7. How to profit from learning CF? Career track 2 – analysis and research. How to profit from learning CF? Career track 3 – financial management at a non-financial corporation

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From the course by Moscow Institute of Physics and Technology

Principles of Corporate Finance – A Tale of Value

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Moscow Institute of Physics and Technology

Principles of Corporate Finance – A Tale of Value

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Course 2 of 5 in the Specialization Understanding Modern Finance

The study of Corporate Finance seems to be a very generic part of business education. Still, it either falls in the trap of intimidating formulas or is superficially journalistic. Both extremes preclude the understanding of the core finance ideas, concepts, and models. This Course is an attempt to avoid the above extremes. We discuss the core basis and mechanisms of modern corporate finance in a learner-friendly way. We will analyze the market’s most fundamental problems, realize the intrinsic interests and preferences of investors, reveal the true meaning of specific financial terms, and uncover important issues that are so often ignored in choosing and valuing investment projects. The learners will gain insight into the essence of corporate finance. They will be able to use the obtained knowledge and skills to successfully advance in their career at a financial institution, as well as in the area of financial management at non-financial businesses.

From the lesson

What We Learned About Finance. Some Conclusions. Corporate Finance and Career Tracks

In the first part of Week 6 we revisit the NPV criterion and compare it to two other very popular project assessment methods – economic value added (EVA) and market value added (MVA). Then we draw conclusions to the Course focusing on the project valuation road map and the role of options in valuation of projects and securities. We also address some major unanswered questions in corporate finance. The second part of Week 6 is devoted to the practical application of corporate finance. We discuss how the learners may profit from learning corporate finance. Then we describe popular career tracks in which the knowledge and skills obtained in the Course may prove instrumental for success. Those include sales and trading, analysis and research at a finance company, as well as financial management at a non-financial corporation.

6.1. The NPV criterion revisited8:23

6.2. Economic value added (EVA) and Market value added (MVA) as investment criteria6:47

6.3. The project valuation road map10:25

6.4. Options and their role in valuation7:04

6.5. Major unanswered questions in corporate finance9:10

6.6. How to profit from learning CF? Career track 1 – sales and trading6:11

6.7. How to profit from learning CF? Career track 2 – analysis and research. How to profit from learning CF? Career track 3 – financial management at a non-financial corporation5:47

Meet the Instructors

Konstantin Kontor
Director and Professor of Finance and Strategy
American Institute of Business and Economics (AIBEc)

Well now, we are in our final episode, and

I will say a few words about careers as a financial analyst and

as a financial manager in general.

Now, all of you know that what analysts does, This is all about,

Valuation, And in our words about NPV.

Now, the story here is wider, because when you talk about being an analyst,

you may be an analyst in a financial company, in a bank, in an investment bank,

in a company that manages assets.

Then in this case, as an analyst,

you are likely to be working with these advanced models.

So here, you have to be more or less knowledgeable of mathematics, and

you have to be not only knowing what we've covered in this course,

but also some other, let's say, more advanced approaches.

But at the same time, if you study companies,

then you have to have a broader view.

For example, it's important for us to realize, for all of us,

that we oftentimes use the word black box here, but the project is not a black box.

In order to properly value the project,

you have to understand how it operates and how it produces value.

So the key value of an analyst is this ability to understand what's going on.

So when you study an investment project in a company,

you have to see the big picture.

You have to see how this project creates or destroys value.

And only then you will apply valuation techniques.

Oftentimes people who are poor analysts,

they immediately start calculating NPV with some off-the-cuff inputs,

and the results that they obtained are of low value.

And this is not the way to proceed in the career of an analyst.

Well, some long time ago, I was the director of research in

an investment bank, and I had a whole team of people.

And most of these people who were the best,

they really would go beyond the scope of just doing valuation.

They would really understand the industry, they would understand the trends,

they would understand what the may, what the forecast, and

what the perspectives are, and these people really did the best.

Now, this does require experience, and

the only way here is to keep working on these projects, on these valuations.

But at the same time, that should be done, like I said,

not in a very straightforward way.

You have to see the bigger picture all the time, and

you have to realize the context of what's going on in this company,

in this industry with this product, and so on and so forth.

Now, this is sort of a standard thing.

When people talk about corporate finance,

then the immediate career path is to be the analyst.

Well, you may be just the analyst, you may be a senior analyst, you may be the head

of a group of analysts, so this is a really nice and profitable career path.

But you can always say, well, how many companies that employee analysts exist?

Well, there are quite a few, because you don't have to be a financial analyst.

You may be a business analyst, in general, for

whom this knowledgeable will be quite helpful.

If you work on the strategy of a company,

you may employ valuation as part of your instruments.

But still, there a much wider area which I would call as a financial manager.

And financial managers exist in all companies, so

this is at wide area, and a financial manager, well,

is up to the financial director or maybe even through CEO of the company.

There are quite a few CEOs who have a background as being financial managers.

Now, the idea here is that you have to gain experience

in making major decisions about how the projects

that may be taken by the company influence its

financial position, influence its value,

and therefore how it produces value for

its final beneficiaries for the shareholders.

So this is really a vast area.

And like I said,

it's not enough to know just what we talked about in corporate finance.

You cannot replace experience here, but the view that is

concentrated on this NPV approach oftentimes, if not always, helps.

Now, clearly I can talk a lot more about these

perspectives for the people to just pursue careers in finance

through the use of corporate finance, but I will not steal your time anymore.

I will just thank you all for your time and

effort that you spent in studying corporate finance, and

l wish you all positive and bigger projects in your career and personal life.

Thank you.

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