Sunflower Intelligence
Finance & Accounting

F00 · Introductory

Foundations of Finance

9 lessons

F00 · Introductory · 9 lessons in three modules · about 11 hours

Foundations of Finance

What finance is and how it differs from accounting and economics, the principles behind every financial decision, the vocabulary professionals use, and how financial markets and their participants work.

What you will learn

  • Explain what finance studies, why time and risk sit at its centre, and how it differs from accounting and economics, and calculate accounting profit, operating cash flow and economic profit.
  • Apply the core decision principles (time value, risk and return, cash over profit, incremental cash flows, diversification, no arbitrage) to everyday choices.
  • Use the essential vocabulary of finance correctly (capital, liquidity, solvency, market capitalisation, enterprise value, EBITDA and working capital), and calculate and interpret the ratios built from it: current and quick ratios, debt-to-equity, EV/EBITDA and P/E.
  • Calculate simple and compound interest, future and present values, effective annual rates for any compounding frequency, inflation from a price index, and exact real returns.
  • Describe the main financial markets and what each participant does in them.
  • Explain agency problems between owners, managers and lenders, calculate agency costs and risk shifting in simple cases, and evaluate the tools used to limit them.

Prerequisites

None. The course starts from scratch.

How it works

Each lesson teaches the idea from first principles, works examples step by step, lets you explore it in an interactive, then has you practise with feedback. A lesson is complete when you have worked its guided problems and scored 80% on its knowledge check. Mastery is tracked separately and comes back for review before you are likely to forget. Each module ends with a test; the course ends with a project and a final assessment.

Fictional case

Lantern Coffee Co. A fictional coffee business founded by Ana Lim. It starts as a catering and barista-training service, opens its own cafés and an online shop for beans, and plans a canned cold brew. Every name and figure in it is invented for teaching.

Not sure where to start?

The diagnostic has 12 questions across the course. It doesn’t count toward anything; it suggests the module to start from. Take the diagnostic.

Modules and lessons

Module 1 What finance is

  1. What finance is: money, time and riskFinance studies how people, businesses and governments raise, allocate and manage money over time, under uncertainty. Learn why a dollar today is worth more than a dollar later, how to move an amount forward or back in time, how to put a number on an uncertain outcome, and where finance does its work.75 min · not started
  2. Finance, accounting and economicsAccounting records what has happened, economics explains how people and whole economies behave, and finance decides what to do next with money. Learn what each field asks of the same decision, how finance turns accounting records into forecasts, and what people in each field do.65 min · not started
  3. Six principles behind financial decisionsAlmost every financial decision, from a household budget to a company’s biggest investment, rests on six principles: time value, risk and return, cash over profit, incremental cash flows, diversification and no arbitrage. Learn what each says, why it holds, and how to apply it to Ana’s first decisions about Lantern.70 min · not started
  4. Module 1 test11 questions on this module. 70% passes.not taken

Module 2 The language of finance

  1. Capital and liquidityWhere a business’s money comes from (debt and equity), and whether it can pay its bills when they fall due. Learn the words professionals use for both, calculate working capital and the current ratio, and see why a business can be worth a lot and still run out of cash.75 min · not started
  2. Value and valuation wordsBook value, market value, market capitalisation, enterprise value, EBITDA and the multiples built from them: the words analysts use to say what a company is worth. Learn to calculate each one for Harbourline Roasters, to say what it leaves out, and to see why every valuation rests on assumptions.75 min · not started
  3. Interest and inflationInterest is what money earns over time; inflation is what time takes away. Learn simple and compound interest, why compounding frequency matters, how an APR differs from an effective annual rate, and how to turn a nominal return into a real one, so you can tell whether savings are really growing.75 min · not started
  4. Module 2 test11 questions on this module. 70% passes.not taken

Module 3 Markets and the people in them

  1. Financial marketsFinancial markets move savings to the people and firms who can put them to work, set prices for risk and time, and let investors sell when they need cash. Learn the main ways to sort them: direct or through an intermediary, new issues or resale, short or long term, what is traded, and where.70 min · not started
  2. Market participantsBanks, investment banks, pension funds, insurers, mutual funds, hedge funds, brokers and dealers each do a different job in moving money and risk, and central banks and regulators set the rules they work under. Learn who does what, how each is paid, and what the protections such as deposit insurance do and do not cover.80 min · not started
  3. Governance and the agency problemWhen the people who run a business are not the people who own it or lend to it, their interests can pull apart. Learn why that happens, what it costs, and the tools (boards, incentive pay, loan covenants, disclosure) used to keep managers working for the people whose money they use.75 min · not started
  4. Module 3 test10 questions on this module. 70% passes.not taken

Project and final assessment

  1. Project: Two choices for Ana’s savingsCompare two ways for a small-business owner to use her savings, using time value, risk, liquidity and inflation, and explain the choice in plain language.not taken
  2. Final assessment24 questions across the whole course. 70% passes.not taken

The course is complete when every lesson is complete, every module test is passed, the project is finished and the final assessment is passed.

Resources

  • Glossary: every term this course defines.
  • Formulas: every formula with its symbols and units.
  • Review: flashcards and the questions you missed, when they are due.

Elsewhere on this site

Sources used in this course

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  2. Dahlquist, J. & Knight, R. (2022). Principles of Finance, section 1.8, “Concepts of Time and Value”. OpenStax. openstax.org/books/principles-finance/pages/1-8-concepts-of-…
  3. Dahlquist, J. & Knight, R. (2022). Principles of Finance, section 7.1, “Now versus Later Concepts”. OpenStax. openstax.org/books/principles-finance/pages/7-1-now-versus-l…
  4. Dahlquist, J. & Knight, R. (2022). Principles of Finance, section 1.2, “The Role of Finance in an Organization”. OpenStax. openstax.org/books/principles-finance/pages/1-2-the-role-of-…
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