FINANCE 340

Financial Analysis and Working Capital Management

Spring, 2007

Kevin C.H. Chiang, Ph.D.

Office: CBA 425, 523-4586 (office)

E-mail:

Official Office Hours: MW 9:00-10:00 a.m. and by appointment

Unofficial Office Hours:I have an open-door policy. You are invited to come by my office any time you wish. If you prefer to schedule an appointment, please send me an e-mail. If you find it inconvenient to come by my office, I invite you to send me an e-mail.

Required Reading:

1. Chiang’s electronic notes. They are available on Chiang’s website.

2. Finance 340, Northern ArizonaUniversity, by Gibson, Brigham, Daves, Mayes, and Shank (ISBN # 0-324-27526-9).

Course Description:

The objective of Finance 340 is to provide students with a thorough understanding of financial statement analysis and working capital management.

This course examines the role of financial statement analysis in the evaluation of the firm and the prediction of its future economic conditions. The course will stress fundamental analysis and applications related to capital markets.

This course introduces the principles of effective working capital management and the working capital cycle. Students will learn how to manage current asset and current liability accounts, such as cash, accounts receivable, inventories, accounts payable, and notes payable.

COURSE PREREQUISITES:

Finance 311

Expected Student Outcomes:

At the end of this course, students should be able to:

  1. Process financial information (SEC filings).
  2. Evaluate financial statements to determine firm strengths and weaknesses.
  3. Forecast future short-term financing needs.
  4. Describe the effects of various working capital strategies on firm risk and profitability.
  5. Devise an efficient strategy for managing cash and marketable securities balances.
  6. Determine optimal inventory balances and order sizes.
  7. Determine the effects of various credit policies on sales and profitability.
  8. Describe various sources of spontaneous financing and their effect on profitability and risk.
  9. Describe various sources of non-spontaneous financing and their effect on profitability and risk.

Grading:

Final Grade

90.00% and above A

80.00% - 89.99% B

70.00% - 79.99% C

60.00% - 69.99% D

Less than 60.00% F

There will be one interim exam and a final exam, each worth 30% of your grade. 40% of your grade is based on quizzes, homework, cases, and research projects.

Cases and research projects can be group tasks. The number of students in each group is either three or four. Group members should make it very clear to other group members at the onset how would one plan to contribute to the group. If free-rider problems occur, the free-rider can be expelled from the group. If a student cannot meet with the group, she/he has the option to complete the project on her/his own. In general, the grading policy is that if you thoroughly investigate the case/research question and prepare a complete report without making obvious errors, you earn a B. To earn an A for a case or research project, your group needs to do an excellent job. That is, I’d like to see (1) your own points of view, (2) a clear line of reasoning, and (3) supporting evidence.

Homework assignments are to be done individually and will be graded and returned to you. Most of these assignments can be found in Chiang’s electronic notes.

To facilitate your learning, some end-of-chapter problems and questions will be selected and their answers will be provided to you. No points will be given to end-of-chapter problems and questions. However, if you decide to hand in your work, it will be read and returned to you.

UNIVERSITY POLICY STATEMENTS:

A copy of the University Policy Statements on Safe Working and Learning Environment, Students with Disabilities, Institutional Review Board, Academic Integrity Policies and Classroom management Statement can be found at:

Attached you also will find a copy of the CBA Code of Conduct document.

Suggestions:

1. Exams, cases, and projects are designed to facilitate expected student outcomes. It will be beneficial for you to review those objectives before you prepare your exams, case responses, and projects.

2. Students are responsible for attending all classes, participating in quizzes and exams, and turning in assignments. You are responsible for information provided in class, including any handouts,assignments, changes in grade weighting scheme and class policies, test dates, and test coverage.

3. The exams must be solely an individual effort. The university policy on academic dishonesty is strictly enforced. Academic dishonesty will not be tolerated and will result in the grade of “F” for the course.

4. There is a grace period of only 1 week for you to effectively contest about the grades that you receive on your exams or projects.

5. There will be no individual bonus assignments or projects.

Course TOPICS and outline:

  1. Accounting statements and cash flows.
  2. Ratio and common size analysis.
  3. Sources of industry information.
  4. Short term financing planning and financing needs.
  5. Management of cash and marketable securities.
  6. Management of account receivables.
  7. Management of inventories.
  8. Management of accruals and payables.
  9. Management of banking provided financing.

Week 1 / Jan. 17 / Overview
Week 2 / Jan. 22, 24 / Income Statement
Week 3 / Jan. 29, 31 / Balance Sheet
Week 4 / Feb. 05, 07 / Statement of Cash Flows
Week 5 / Feb. 12, 14 / Ratio Analysis
Week 6 / Feb. 19, 21 / Pro Forma Statements
Week 7 / Feb. 26, 28 / Pro Forma Statements
Week 8 / Mar. 05 / First Exam
Mar. 07 / Pro Forma Statements
Week 9 / Mar. 12, 14 / Cash Budgeting
Week 10 / Spring Break
Week 11 / Mar. 26, 28 / Cash Budgeting
Week 12 / Apr. 02, 04 / Cash Budgeting
Week 13 / Apr. 09, 11 / Managing Current Assets
Week 14 / Apr. 16, 18 / Managing Current Assets
Week 15 / Apr. 23, 25 / Financing
Week 16 / Apr. 30; May 02 / Financing
May. 07 (Monday)
3:00-5:00 pm / Final Exam

Note: Class policies, course topics, and grade weighting scheme are subject to change.