Financial management

Описание мероприятия

Описание программы

This course introduces students to the concepts and theories of corporate finance that underlie the techniques which are offered as aids for the understanding, evaluation and resolution of financial managers’ problems.

Aims and objectives

This course aims to cover the basic building blocks of financial management that are of primary concern to corporate managers, and all the considerations needed to make financial decisions both inside and outside firms. This course also builds on the concept of net present value and addresses capital budgeting aspects of investment decisions. Time value of money is then applied to value financial assets, before extensively considering the relationship between risk and return. This course also introduces the theory and practice of financing and dividend decisions, cash and working capital management and risk management. Business valuation and mergers and acquisitions will also be discussed.

Assessment

This course is assessed by a three-hour unseen written examination

Учебный план:

Chapter 1: Financial management function and environment This chapter outlines the fundamental concepts in financial management and deals with the problems of shareholders’ wealth maximisation and agency conflicts.

Chapter 2: Investment appraisals 1 In this chapter we begin with a revision of investment appraisal techniques. The main focus of this chapter is to examine the advantages of using the discounted cash flow technique and its application in basic investment scenarios. 

Chapter 3: Investment appraisals 2 This chapter follows on from Chapter 2 to explore the application of the discounted cash flow technique in more complex scenarios: capital rationing, price changes and inflation, and tax effect.

Chapter 4: Investment appraisals 3 This chapter illustrates the application of the discounted cash flow technique in further complex scenarios: replacement decision, project deferment and sensitivity analysis. 

Chapter 5: Risk and return We formally examine the concept and measurement of risk and return in this chapter. We also look at the necessary conditions for risk diversification, Portfolio Theory and the Two Fund Separation Theorem. Asset Pricing Models are discussed and practical considerations in estimating beta will be covered. Empirical evidence for and against the Asset Pricing Models will also be illustrated.

Chapter 6: Portfolio Theory and Capital Assets Pricing Model This chapter introduces more formally the Portfolio Theory and discusses the derivation of the Capital Assets Pricing Model.

Chapter 7: Practical consideration of the Capital Assets Pricing Model and Alternative Asset Pricing Model Following on from Chapter 6 we examine the techniques for estimating betas and their conceptual and practical considerations. We also introduce an Alternative Pricing Model based on the Arbitrage Pricing Model.

Chapter 8: Capital market efficiency This chapter discusses the concepts and implications of market efficiency and the mechanism of equity and debt issuance.

Chapter 9: Sources of finance – Equity In this chapter we focus on how companies raise funds from the stock and bond markets, and discuss the advantages and disadvantages of this financing method.

Chapter 10: Sources of finance – Debt In this chapter we focus on how companies raise funds from the bond markets, and discuss the advantages and disadvantages of this financing method.

Chapter 11: Capital structure 1 This chapter introduces the arguments of Modigliani and Miller on capital structure, and discuss the implication of the Trade-off Theory.

Chapter 12: Capital structure 2 This chapter critically reviews the existing leading theories of capital structure. Specifically, signalling effect, agency cost of equity and debt, and the Pecking Order Theory will be examined. We will also evaluate the practical considerations of capital structure decisions made by corporate managers.

Chapter 13: Dividend policy This chapter aims to explore how the amount of dividend paid by corporations would affect their market values. The tax, signalling and agency effects of dividend will be discussed.

Chapter 14: Cost of capital and capital investments In this chapter we discuss how the cost of capital can be adjusted when firms are financed with a mixture of debt and equity.

Chapter 15: Valuation of business We introduce the valuation of equity, debt, convertibles and warrants in this chapter.

Chapter 16: Mergers This chapter focuses on the theory and motives of mergers and acquisitions. The determination of merger value and the defensive tacticsagainst merger threats will also be covered. The empirical evidence of using financial ratios to predict mergers and acquisitions will be discussed.

Chapter 17: Financial planning This chapter focuses on the importance of careful financial planning and examines and evaluates the approaches to and methods of financial planning.

Chapter 18: Working capital management The importance of managing working capital will be discussed in this chapter.

Chapter 19: Risk management – concepts and instruments for risk hedging This chapter provides an introduction to risk management, including: the concepts of risk management and the use of derivatives in hedging. 

Chapter 20: Risk management – applications This chapter discusses the techniques commonly used in risk hedging.

Результат обучения:

At the end of the course and having completed the essential reading and activities students should be able to:

• describe how different financial markets function
• estimate the value of different financial instruments (including stocks and bonds)
• make capital budgeting decisions under both certainty and uncertainty
• apply the capital assets pricing model in practical scenarios
• discuss the capital structure theory and dividend policy of a firm
• estimate the value of derivatives and advise management how to use derivatives in risk management and capital budgeting
• describe and assess how companies manage working capital and short-term financing
• discuss the main motives and implications of mergers and acquisitions.
• integrate subject matter studied on related modules and to demonstrate the multidisciplinary aspect of practical financial management problems
• use academic theory and research to question established financial theories.
• be more proficient in researching materials on the internet and Online Library
• be able to use excel for statistical analysis

Требования к поступающим:

If taken as part of a BSc degree, courses which must be passed before this course may be attempted:

• AC1025 Principles of accounting.

Exclusion

• This course may not be taken with FN3092 Corporate finance.