Course Contents:
Day One: Fundamental concepts of Financial Management (part I)
- Define finance , its major areas and opportunities, and the legal forms of business organization
- Describe the managerial finance function and its relationship to economics and accounting.
- Understand the four financial statements and how they are prepared.
- Understand who uses financial ratios, and how they are used.
- Analyze a firm’s liquidity and activity ratios.
- Discuss the relationship between debt and financial leverage and the ratios used to analyze a firm’s debt.
- Analyze a firm’s profitability and its market value.
- Discuss the firm’s statement of cash flows, operating cash flow, and free cash flow.
Day Two: Fundamental concepts of Financial Management (part II)
- Understand the concept of future value and present value, their calculation for single amounts, and the relationship between them.
- Find the future value and the present value of both an ordinary annuity and an annuity due, and the present value of a perpetuity.
- Calculate both the future value and the present value of a mixed stream of cash flows.
- Understand the effect that compounding interest more frequently than annually has on future value and the effective annual rate of interest.
- Describe the procedures involved in (1) determining deposits needed to accumulate to a future sum, (2) loan amortization, (3) finding interest or growth rates, and (4) finding an unknown number of periods.
- Understand the meaning and fundamentals of risk, return, and risk preferences.
- Describe procedures for assessing and measuring the risk of a single asset.
- Discuss the measurement of return and standard deviation for a portfolio and the concept of correlation.
- Review the two types of risk and the derivation and role of beta in measuring the relevant risk of both a security and a portfolio.
- Explain the capital asset pricing model (CAPM), its relationship to the security market line (SML), and the major forces causing shifts in the SML
Day Three: Securities and Their Valuation
- Differentiate between debt and equity
- Discussion of interest rates, yield curves, and their relationship to required returns.
- Features of the major types of bond issues are presented along with their legal issues, risk characteristics, and indenture convents.
- Explains models for valuing bonds and the calculation of yield-to-maturity using an approximate yield formula
- Discuss the features of both common and preferred stock.
- Describe the process of issuing common stock, including venture capital, going public and the investment banker.
- Understand the concept of market efficiency and basic stock valuation using zero-growth, constant-growth, and variable-growth models.
Day Four: Projects and their Valuation
- Explain what is meant by the marginal cost of capital.
- Determine the cost of long-term debt, and explain why the after-tax cost of debt is the relevant cost of debt.
- Determine the cost of preferred stock.
- Calculate the cost of common stock equity, and convert it into the cost of retained earnings and the cost of new issues of common stock.
- Calculate the weighted average cost of capital (WACC) and discuss alternative weighting schemes.
- Understand the key elements of the capital budgeting process.
- Calculate, interpret, and evaluate the payback period.
- Calculate, interpret, and evaluate the net present value (NPV) and economic value added (EVA)
- Calculate, interpret, and evaluate the internal rate of return (IRR).
Day Five: Leverage and Working Capital Management
- Discuss leverage, capital structure, breakeven analysis, the operating breakeven point, and the effect of changing costs on it.
- Understand operating, financial, and total leverage and the relationships among them.
- Understand short-term financial management, net working capital, and the related trade-off between profitability and risk.
- Describe the cash conversion cycle, its funding requirements, and the key strategies for managing it.
- Discuss inventory management
- Explain the credit selection process and the quantitative procedure for evaluating changes in credit standards
- Review the procedures for quantitatively considering cash discount changes, other aspects of credit terms, and credit monitoring
- Understand the management of receipts and disbursements, including float, speeding up collections, slowing down payments, cash concentration, zero-balance accounts, and investing in marketable securities.