University of Bridgeport FIN 400 Financial Management (Corporate Finance)
MBA Program
Notes and Syllabus for FIN 400 Financial Management (Corporate Finance)
Realizing that this outline assures topic and subject content coverage, each instructor will adapt the presentation of material as he sees fit. This can be based on class composition, student abilities and interests, events occurring in the industry, and other variables. The time spent on any topic is also at the discretion and judgment of the instructor. Discussion questions proposed in this outline can be added to, changed, or eliminated as the instructor sees fit. These questions double as learning objectives on each topic.
FIN 400 Financial Management (A First Course in Corporate Finance)
Course Purpose
Financial Management presents the basis for the corporate manager’s point of view of finance and decisions based on finance. It is a first corporate finance course. Methods of analysis, the industry, markets, jobs, risk are covered among the technical topics in the outline. The whole idea of learning the topics in this course is to become more aware of the world of finance, its language, its opportunities, and ways to implement operations successfully in many kinds of situations.
Text & other materials
1. Fundamentals of Financial Management, 13th ed by Brigham & Houston
2. Access to The Wall Street Journal
3. Resources for ‘executive-level’ understanding of topics (see Bibliography)
4. Handouts
Grades
Participation, identifying course topics in the news, application on quizzes and in
discussions (group work) 25%
Three exams 45%
Two case write-ups and discussion 30%
Bibliography
The Wall Street Journal, The Economist, Investor’s Business Daily, The Financial Times, Business Week, Investopedia.com, MarketWatch.com, reports from banks, brokerages, governments, associations, exchanges, …
Course Outline
Section One
Overview and toolsCh 1, 2, and familiarity with the bibliography
financial environment
the firm – the corporation
stakeholders
markets
market participants
Accounting reviewCh 3, 4, relevant definitions from investopedia
financial statements, ratios
annual reports/10-K
trends
Intro to interest ratesCh 6
cost of money
yield curves & timelines
risk premiums
causeschanges in rates
Section Two
Time value of moneyCh 5, investopedia
the time line
the yield curve
PV, FV, annuities, et al
BondsCh 7
markets, maturities,
ratings, definitions,
yields, valuation
Risk vs. returnCh 8
statistics review
portfolio applications
Stocks – equitiesCh 9, 15
classes, returns, yields
valuation
dividends & policy
Section Three
Financial management
cost of capitalCh 10
common, pfd, debt
WACC
capital structureCh 14
risk, management,
environment
capital budgetingCh 11, 12, 13
NPV, IRR, payback,
cash flow, risk, growth
working capitalCh 16
current assets & liabilities
international aspectsCh 19
currency exposures
FX markets
raising capital overseas
Case and problem write-up assignments
Select an article from The Wall Street Journal or other source in the bibliography on an issue that has been discussed in class
Identify the topic of the course to which the story relates
Identify the problem or issue in the news story
Using class or other resource information, create two or three solutions to improve the situation
Propose your best solution with your reasoning
Class participation and news on class topics (for grades) are simply shorter versions of case write-ups from the daily reading of the financial press.
Discussion and concept questions by topic
Section One
Overview and tools
1. What is the current financial environment? Discuss where the major markets are and how different stakeholders in a corporation are affected by those markets.
2. How does the form of the firm and its industry affect the operation of the firm?
3. Explain the consequences of globalization and information technology on any firm. What additional problems and opportunities are created for new and existing firms?
4. Describe and define the differences in the major USA financial markets. Which institutions are the major players in those markets?
5. Why does the stock market take primary discussion in the introduction of this course? Name some participants in the stock market.
Accounting review
1. Why are accounting and financial statements so emphasized in corporate finance? What is the purpose of this part of the financial industry?
2. Compare a couple of industries’ income statements and balance sheets. Point out some differences in the liabilities of a bank and a railroad, for example. In which industries does inventory and inventory management matter more?
3. Do the profitability ratios “make all comparisons of all industries equal?”
4. What does the quality of a set of financial statements mean to you?
Intro to interest rates
1. What does the yield curve depict? What are the major factors affecting the yield curve?
2. Who are the major players at various maturities on the curve?
3. How can some borrowers obtain a lower cost of money than others? Illustrate several different issuers of securities on a yield curve.
4. How is the timeline similar to the yield curve?
Section Two
Time value of money
1. Explain how the timeline allows us to visualize the cost of money both at a present time and a future time.
2. Explain what Present Value means as opposed to Future Value. What makes them equal in a financial sense? Link this concept to a yield curve’s price of money at any maturity.
3. Define an annuity and demonstrate how a timeline illustrates an annuity’s Present Value.
4. If a corporation expected different amounts of cash flows over the life of a project, show how the timeline is useful to illustrate that as well.
Bonds
1. List the major categories of issuers of debt. Where does each one compare with the others on the yield curve? Illustrate this.
2. Define the key characteristics of bonds.
3. Explain the kinds of risks bonds have and how they are rated. Who rates them?
4. Describe the yield to maturity and the current yield. What is the use of each of these?
5. Show the present value of a long-term bond by the use of a timeline.
Stocks
1. Which are the largest stock markets in the world? Relate ownership with these large market centers and the effects of available information, taxes, and regulatory environment. Does politics matter to the stock market?
2. From where does the intrinsic value of a company’s stock come? How do the financial statements contribute to this value?
3. Compare the two ways a stock can provide returns to an investor – dividends and price appreciation. How do dividends affect a stock’s price? Discuss signaling.
4. Compare the Corporate Valuation Model with the Discounted Dividend Model. Here, too, discuss why financial statements provide a sound basis for stock valuation.
Section Three
Financial management
1. Does each firm have the same cost of capital? Why or why not? What does a company’s credit rating have to do with this?
2. List the components to a firm’s Weighted Average Cost of Capital. How does the current financial environment affect the cost of a firm’s capital? How does management’s attitude toward risk affect this cost? Is there a tax effect?
3. How does the yield curve help a firm assess its reinvestment risk?
4. Define business risk and financial risk. How does a firm control each of these? What part does the financial environment play in creating or helping a firm manage these?
5. As a firm searches for investments to increase its value, of what use are each of these methods of project selection: Net Present Value, Internal Rate of Return, the Payback Period?
6. Why is an accurate record of cash flows, both in and out of the corporate treasury, such a vital piece of information for the capital budgeting process? Would an investment banker’s viewpoint be the same about this as the corporation’s? What value can an investor gain from this information?
7. In a way, current asset investment and financing are similar to a bank’s management of its loan/deposit ratio. Describe the differences between an aggressive and a conservative financing policy for current assets. Since this topic brings us back again to financial statements, discuss the cash conversion cycle for payables, receivables, and inventories. Use liquidity ratios to focus your discussion.
8. Short-term financing through banks can ease cash crises. Describe the pros and cons of credit lines, revolving loans, commercial paper, and a bank loan itself.
9. There is an entire course on international corporate finance, but what is the major difference in raising capital from abroad or investing in projects abroad?
10. How does the corporation find information on foreign currencies, foreign economies, foreign investments, and how does it begin to manage the opportunities and risks in these areas?
This document created by Prof. Dr. Edward M. Jankovic 27 May 2014
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