The course introduces students to the principles, concepts and practices of corporate financial management, and the theories and applications underlying the financial decision making process. To this end, the course addresses the generation and acquisition of financial resources--both from internal operations and from external capital markets--and their effective utilization, and control within the organization. The major topics covered include valuation, capital structure and its cost, capital budgeting and long term investment decisions, working capital management, and dividend policy. To enhance better understanding of the theoretical applications of financial management, cases and problems are used as part of the course presentation and study process.
COURSE OBJECTIVES At the end of this course students will be able to:
• Explain and evaluate the concept of shareholder wealth maximization and how it relates to other possible objectives of the firm's management as well as the nature of the agency relationship inherent in the corporate structure.
• Understand the significance of information included in the income statement and balance sheet, discuss the importance of the cash flow statement and explain the difference between accounting net income for the firm and cash flow; analyze a firm's financial performance using financial ratio analysis. • Describe how interest rates are determined and the role played by financial markets and institutions in the global financial system.
• Explain the concepts of compounding and discounting and utilize these tools to
calculate the future value and present value of lump sums, annuities, and uneven cash flow streams and in addition calculate the value of other variables such as the interest rate, time period, and periodic payment.
• Determine the expected rate of return and risk of an individual investment as well as a portfolio of assets, including concepts such as standard deviation, correlation, diversification, and the CAPM (Capital Asset Pricing Model).
• Explain the determinants of intrinsic value and utilize these concepts to determine the value and yields of bonds and preferred and common stocks.
• Calculate various measures of project profitability using traditional capital budgeting techniques including Payback Period, Discounted Payback, Net Present Value, Internal Rate of Return, and Modified Internal Rate of Return.
• Explain the concept of the cost of capital and how it is affected by the firm’s capital structure and the application of these concepts to capital budgeting decision-making and dividend policy.
• Describe the risk-return tradeoff involved in working capital management and explain how firms choose appropriate levels of working capital and sources of short term financing.
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Students will be able to:
• Apply critical thinking skills to complex business problems including:
Identifying and evaluating relevant issues and information;
Generating and evaluating possible solutions to problems.
• Use quantitative analytical skills to:
Identify and analyze material factors that are involved in business problems;
Determine and apply appropriate problem-solving techniques to business problems.
• Use information technology as a tool to perform essential business tasks.