Economics and Finance Course Overview
Introduction
- Instructor: Sriram Chundi
- Course Format: Combines theory with practical insights
- Originally taught in person, now available as a video course
- Topics covered include business concepts, capital markets, stock valuation, financial statements, capital budgeting, the business cycle, ESG, macroeconomics, portfolio diversification, and alternative investments.
- Additional resource: Changemakers Media YouTube channel
Key Concepts from the First Class
Thought Experiment
- Magic box that outputs money indefinitely
- Comparison to a savings account with 1.05% interest
Return on Investment (ROI)
- ROI is a tool for comparing investment efficiency
- Formula: (Current value of investment - Cost) / Cost
- ROI's limitations: Doesn't account for time
Time Value of Money
- Money today is worth more than the same amount in the future
- Continuous compounding example
Net Present Value (NPV)
- Difference between cash inflows and outflows
- Calculated using a discount rate
- Example: Vending machine investment
Mortgages and Interest Rates
- Example calculations for mortgage payments
- Impact of interest rates on long-term costs
Understanding Capital and Financial Markets
What are Capital Markets?
- Places where goods or services are exchanged
- Importance for firms and consumers
Stocks and Bonds
- Stock: Represents ownership in a company
- Bond: Represents a loan to a company or government
- Differences between stocks and bonds
Stock Valuation
- Methods: Discounted cash flow, comparables
Business Strategies and Financial Documents
SWOT Analysis
- Strengths, Weaknesses, Opportunities, Threats
BCG Matrix
- Categories: Stars, Cash Cows, Question Marks, Dogs
Porter's Generic Strategies
- Cost leadership, Differentiation, Focus strategies
Financial Statements
- Statement of Profit or Loss
- Statement of Financial Position
- Cash Flow Forecast
Analyzing Financial Statements
- Ratios, Horizontal Analysis, Common Size Technique
Capital Budgeting
- Evaluating long-term investments
- Consider time value of money and risk
- Methods: Payback Period, NPV, IRR
Macroeconomics and the Business Cycle
Key Economic Indicators
- GDP, Inflation, Unemployment
Business Cycle Phases
- Trough, Expansion, Peak, Recession
Fiscal and Monetary Policy
- Government and Central Bank roles
ESG (Environmental, Social, Governance)
- Importance in modern investing
- Impacts on stakeholders and global reach
Portfolio Diversification
- Reducing risk by spreading investments
- Types of risk: Systematic and Unsystematic
- Active vs Passive Management
Alternative Investments
- Non-conventional investment opportunities
- Real estate, equipment leasing, hedge funds, cryptocurrencies, etc.
Conclusion
- Recap of key topics and their interconnections
- Encouragement to continue exploring these concepts
- Reminder about the Changemakers Media YouTube channel
These notes provide a comprehensive summary of the first class in the economics and finance course, covering foundational concepts, investment strategies, and the interconnectedness of economic disciplines.