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View Full Version : Question for business grads out in the real world.

Python49
11-18-2005, 07:04 PM
Well as some of you know i'm taking a corporate finance course in school and it's been kicking my ass. A combination of me thinking this was another one of those courses I could cruise through and get an A while not keeping up when I should have, and the fact that my professor is a really bad teacher. He just goes by the book basically so if you don't understand the book you're in trouble... and this book doesnt make it easy to understand. I'm sure some of you could probably sit with me for 30 seconds and explain to me some of this stuff.

Well anyway, I have 2 questions, my first question has to do with the fact that even though i'm going to be able to get a B in this course when I really failed (some sick grade curving he's done for the class) I am worried though that by not understanding this material, I may be screwed when I get out into the real world.

1) I wanted to ask some of you who are already out in the real world how crucial you think corporate finance is to jobs that people would get with a business major? I'm told that for stuff like day trading and MGMT consulting you don't really have to understand the actual computations of stuff like Supernatural Growth Formulas, Dividend Growth, IRR/ARR's, etc.. since alot of what you need to know is learned on the job anyway.

Heres an example of the type of stuff I don't understand so you can tell me if this is very important to success in this field, all these formulas give me a headache.

WACC = (E/V) × RE + (D/V) × RD × (1 - TC)
Bond value = [ C × (1 - (1 + YTM)-n)/YTM ] + [ F (1 + YTM)-n]
Fisher Effect: 1 + R = (1 + r) (1 + h) &amp; R ˜ r + h

Future/Present Value of multiple cash flows

Common stock growth formulas, (1 + R) = (D1 + P1) / P0 and P0 = (D1 + P1) / (1 + R)

Computations of these formulas is stuff that even if I some how plug the correct # in somewhere, i'm not fully understanding what's going on anyway so what good is it if I wouldnt be able to apply it.

I understand simple stuff like having a Net Present Value &gt; 0 is good and would be a good investment, stuff like sunk costs, its just the actual computation of alot of this stuff i'm not getting.

2) My second question is.... if I were to switch majors to Small businesses and Entreprenuership, would certain job opportunities be open to me as they would had I majored in finance? I guess im asking, if I major in small businesses, would this mean all I can do is work on starting my own business... or what other opportunities come with this concentration. What type of person would this concentration be ideal for? If I want to get into possibly real estate, investing, my own business, etc... would this be an ok major? I assumed finance was best for this type of thing, but wasn't sure what jobs are only open to finance and if i'd be interested in those jobs anyway.

Figured i'd ask people who are out in the corporate world and see with their own eyes what goes on. Would anyone suggest going back and taking this course again so I can understand it?

11-18-2005, 08:34 PM
[ QUOTE ]
1) I wanted to ask some of you who are already out in the real world how crucial you think corporate finance is to jobs that people would get with a business major? I'm told that for stuff like day trading and MGMT consulting you don't really have to understand the actual computations of stuff like Supernatural Growth Formulas, Dividend Growth, IRR/ARR's, etc.. since alot of what you need to know is learned on the job anyway. 2) My second question is.... if I were to switch majors to Small businesses and Entreprenuership, would certain job opportunities be open to me as they would had I majored in finance? I guess im asking, if I major in small businesses, would this mean all I can do is work on starting my own business... or what other opportunities come with this concentration. What type of person would this concentration be ideal for? If I want to get into possibly real estate, investing, my own business, etc... would this be an ok major? I assumed finance was best for this type of thing, but wasn't sure what jobs are only open to finance and if i'd be interested in those jobs anyway.

[/ QUOTE ]

Basically, it appears that you don't have a strong aptitude for applied maths. Fair enough, I don't either. To math wizzes the forumlae you listed in your post are elementary. The fact that you suggest switching your major also suggests you might not have that special interest in finance.

The level/complexity of maths and importance of financial formulae depends on the specific job you have. You are correct that daytraders do not need to know this stuff. That said, you can make trading as mathematical as you want it to be(i.e. a lot of engineers who become traders will do a lot of stat analysis/backtesting with highly complex maths derived from quantum physics, fourier series, wavelets, etc etc)
Mgmt consultants won't be doing this stuff though I believe they do some surface level stat analysis.
If you are working in investment banking, yes you'll need to know this. Equity research too. Derivatives desks you'll need good maths too.
Marketing, advertising, real estate sales, no.
Anyway, aside from this, your main concern should be what you want to do. It sounds like you are still very undecided and just have a general interest in business, not finance. I know it's tough to figure this out and you'll probably change your mind lots of times. It makes it even harder since you have no idea what each profession is really like except for some recruiters giving you a trashy powerpoint presentation and hearing about your frat brother working 120 hour weeks at Merrill making bank.

Majoring in finance is good if you want to land a job in the field, but not a must. Majoring in small businesses doesn't rule out the possibility of getting a job in finance, and it doesn't mean you are going to be consulting new startups either. Your major won't make or break you but clearly it can help you along the way toward a certain career.

So yeah, I suggest you do two things. Think about what you want to do and take courses that are fun and interesting to you. Once you have some general ideas of what you want to do, think about what courses you could take that would have a significant impact on your ability to succeed in that field. So, let's say you are very interested in trading and decide you want to pursue it as a career. Then, you'd benefit by taking some courses in programming and statistics.

DesertCat
11-19-2005, 01:06 AM
[ QUOTE ]

1) I wanted to ask some of you who are already out in the real world how crucial you think corporate finance is to jobs that people would get with a business major? I'm told that for stuff like day trading and MGMT consulting you don't really have to understand the actual computations of stuff like Supernatural Growth Formulas, Dividend Growth, IRR/ARR's, etc.. since alot of what you need to know is learned on the job anyway.

Heres an example of the type of stuff I don't understand so you can tell me if this is very important to success in this field, all these formulas give me a headache.

WACC = (E/V) × RE + (D/V) × RD × (1 - TC)
Bond value = [ C × (1 - (1 + YTM)-n)/YTM ] + [ F (1 + YTM)-n]
Fisher Effect: 1 + R = (1 + r) (1 + h) &amp; R ˜ r + h

Future/Present Value of multiple cash flows

Common stock growth formulas, (1 + R) = (D1 + P1) / P0 and P0 = (D1 + P1) / (1 + R)

Computations of these formulas is stuff that even if I some how plug the correct # in somewhere, i'm not fully understanding what's going on anyway so what good is it if I wouldnt be able to apply it.

[/ QUOTE ]

Warren Buffett has never done a real DCF calculation. He doesn't even have a calculator. He says that he estimates the results in his head and "abhors" the use of false precision in valuation estimates. He's said something to the affect that if you think any numbers beyond the decimal point matters you aren't asking the right question.

Of course he's not representative of the typical wall streeter...

Sniper
11-19-2005, 05:25 AM
[ QUOTE ]
Would anyone suggest going back and taking this course again so I can understand it?

[/ QUOTE ]

Taking a class, is not the only way to learn things... you should be looking forward to continually learning the rest of your life, so now might be a good time to figure out how to learn material you have an interest in, without having to have a teacher lecturing you into boredom! /images/graemlins/wink.gif

Considering you're here on 2+2, and assuming you didn't take a college course in poker play... you already know how to learn, just apply it to the finance material you are having trouble with!