Presentation of Fa

Good afternoon everyone! First I would like to thank you all for this session module, especially Professor Liu and Kevin Dow. Thank you for your contributions in this module which broaden our views a lot.

This presentation is the crystal of our group members, everyone made contribution on it.

Our presentation will be divided into two parts. In the first part, I would like to show couples of “take-aways” in this module. Then, for the second part, Lady Wang Dan will make explanation to the questions, of course, only few typical questions will be explained in details, rest of them will be reviewed quickly.

1. Accounting and finance

Actually the accounting provides information to the shareholders, creditor, government who are outside of the company, and also provide information to all levels of manager who direct and control its operation.

At very bottom line, the finance is all about allocation of assets or money. But how to make decision? So the potential investor needs information to support their decision.

So they come to see the accounting statements. It is a real reflection of the condition of one company if there is no fake information. After the information is got from accounting, they could allocate money.

So at very bottom line we can summarize that the accounting is a tool to support the finance to make money.

2. Equity premium puzzle

Actually this terminology really puzzled me when I looked at it for the first time. A lot of complicated formulas are involved in it. Unfortunately I am not good at mathematics, but fortunately I will talk about formulas because I was always failed in my math exams. What can I do? Use a simple example to show my understanding.

Most of us here were born in 1970s or 1980s, we will retire in 30 years or even longer. Are you sure you could get enough pension 30 years later? Not exactly. The amount of pension is not enough to pay all of you because of the time value of money. Why? Because it is lying down in the bank,...