Question

How will you prepare an online finance lesson for colleagues who have never studied economics or business? Topics include financial market theory, financial markets, derivatives, capital budgeting, firm valuation using FCF, equity valuation and debt. vs equity financing

Answer 1

When you are trying to explain some topic to some who is not from that background then it becomes very important that you explain things in layman terms and preferably with a real-world example with every concept. It helps in relating and understanding things easily. For example, let’s say you are trying to explain Financial market theory. There are many theories in the market and all have their own significance but you can start to with the basic concept like Time value of money. Time value of money is one of the simplest concepts in the finance world on which the entire financial system is based which is the value of a dollar today is more than the value of same dollar tomorrow. You can further explain these things with examples. This will actually help you in getting a good start and getting their attention and then you can move on to complex theory like equilibrium, MM theory or others. Also, while explaining concepts like derivative, capital budgeting use simple language and no complex terms. Let’s say you are trying to explain derivatives to someone.

In simple words derivative is a financial product which derives its value from the underlying asset. The underlying asset can be anything be it stock, commodities or currencies. Lets say you eneter into a contract to buy a stock at 100 1 year from now, for that you paid $5. This is an example of derivative contract. The underlying is the stock. And the derivative is the contract in which you bought a right to buy a stock by paying $5.

Similarly go one to concept with small -small examples. It actually helps in relating the concept and brings more clarity.