A Very Short Finance Primer – Useful in IBT
Those of us who teach International Business Transactions often face the pedagogically tough situation of having students whose knowledge of basic business and finance varies enormously, from those who were business undergraduates to those who were art history majors. In my case, my IBT class typically also has half to two thirds foreign LLM students whose undergraduate studies in law occasionally, but rarely, included exposure to business or economics as such. So I am always on the lookout for short, readable texts that explain basic business or finance and a (very) little bit of accounting to students in an IBT class that is transactional (meaning, a class focused on contract and basic business associations and basic finance law applied in international transactions, and not focused on procedural mechanisms for dispute resolution and, most importantly, not dealing with trade law).
The best overall business book for the law school curriculum, I have found, is the now widely-used Hamilton and Booth, Business Basics for Law Students – a superb, clearly written book. I use this book extensively in my corporate finance class, but it is too long and detailed for IBT, although I recommend it as a supplement if needed. Actually, I often reread sections of it just to have a plain language exposition of one topic or another in my head – it helps me avoid slipping into finance-speak especially when talking with students.
What to use with IBT? My main law text is Vagts, but I think the general question applies across the available IBT textbooks. In past years, I have used various popular text on global economics – but students widely complained that they were too simple, and highly opinionated. I recently read on a plane, however, the Harvard Business School Press Pocket Mentor, Understanding Finance. It is ten bucks on Amazon, and runs 90 pages in small paperback format. Can’t be more than 20,000 words. It covers four basic topics: Budgeting, financial statements, accounting methods, and cost-benefit analysis. All really, really basic, practical, and aimed at the non-finance manager. It has some self-test quizzes at the back and very good definitions of basic terms. I thought the introductions to financial statements and cost benefit analysis particularly good and intuitive. (I wish it also had a chapter on basic concepts in economics, but you can’t have everything – this is strictly a finance-for-non-financial-managers text.)
Generally, I assign something like this as independent reading and have a multiple choice midterm mid semester – but in order not to scare off those who don’t already have a business background, this midterm can help, but not hurt you. On the other hand, I set it for diminishing returns as you move up the scale, so that although the midterm can serve as an insurance policy against catastrophic failure on the final (catastrophic failure being defined as any form of C at my school, although given grade inflation, I think many students think of a B+ as a bad grade by the third year, judging by complaints), it won’t move you up to a B+ or above. Bonus: Explaining the grading system provides a splendid opportunity to discuss marginal utility.
I also give two other ‘midterms’ – vocabulary quizzes on basic finance and business vocabulary taken from Baron’s finance dictionary, 100 words to memorize a month, on the same basis. Every couple of years, I get an email from a former student out in practice saying … “Dear Professor Anderson, I don’t remember anything from your class except the vocabulary – great job!!” The point of all this being, of course, to try and draw students who don’t have a business background into the Great Conversation about business, economics, and finance.