FUNDAMENTALS OF CORPORATE FINANCE

SHE Level 2
SCQF Credit Points 20.00
ECTS Credit Points 10.00
Module Code M2N325807
Module Leader Paul Gallacher
School Glasgow School for Business and Society
Subject Finance and Accounting
Trimester
  • A (September start)

Pre-Requisite Knowledge

Financial Market Environment (level) or equivalent.

Summary of Content

The aim of this module is to develop student's knowledge and understanding of corporate finance and the business environment within which decisions are made. This module focuses on developing, explaining, and applying key corporate finance concepts and techniques to a broad range of corporate financial management decisions and challenges. In addition to exposing students to appreciable amount of financial theories, this module seeks to blend theory and practice. The seminars will be used to teach students how to build simple financial models in Excel and how to use these models to solve a variety of common corporate finance problems. The Fundamentals of Corporate Finance module uses a combination of theory and algebra were necessary to assist learning about better corporate financial decision making. Students are exposed to the fundamentals of financial management and the important role it plays in business. In this module, we will examine the use of ratios in financial statement analysis, how to perform sensitivity and scenario analysis for a proposed investment. In addition to a number of contemporary issues in corporate finance, students will be introduced to the three key themes of Corporate Financial Management namely Investment, Financing, Dividend Decisions.

Syllabus

Introduction to Corporate Finance Corporate Governance Financial Statement Analysis Introduction to Time Value of Money (Future Value and Compounding), (Present Value and Discounting) Introduction to Loans and Annuities (Ordinary Annuity, Annuity Due, Growing Annuities, Perpetuity, and Growing Perpetuity) Capital Budgeting (Long-Term Investment Decisions Tools) Project Evaluation and Analysis (Scenario Analysis, Sensitivity Analysis, Simulation Analysis etc. Break-Even Analysis) First Assessment. Introduction to Equity Valuation (Present Value Models, Dividend Growth Models, Zero Growth and Constant Growth). Dividends and Pay-out Policies (Types of Dividends, Standard Method of Cash Dividend Payments, Dividend Policies) Raising Capital including: The financing life cycle of a firm, IPOs and Underwriting, Cost of Issuing Securities, Rights Issues etc. Contemporary Issues in Corporate Finance

Learning Outcomes

On successful completion of this module, the student should be able to: 1. Explain the concept of corporate finance within the context of financing decisions, investment decisions and dividend decisions.2. Outline the finance function and how it relates to the wider environment and to strategic planning;3. Demonstrate a good understanding of agency problem and the control of the corporation;4. Identify the three key financial statements of corporations and describe their contents and purposes;5. Create spreadsheets for project analysis and evaluation;6. Understand and be able to apply the concepts of time value of money;7. use Excel's financial commands to convert future values to their equivalent present values, and vice versa;8. Determine the net present value of a series of future cash flows, explain the concept of annuity, perpetuity as well as growing perpetuity.9. Discuss how to raise capital including venture capital, capital markets and their roles in financing start-ups and existing business, amongst others.

Teaching / Learning Strategy

The learning and teaching strategy uses a blended approach of lectures, labs and directed learning supported by GCULearn. Lectures will provide the principal mechanism by which key themes are presented and the corporate finance lab sections will provide the medium for teamwork and gaining practical skills through the use of spreadsheets to explore the lecture themes in more detail. Spreadsheet solutions and solutions to quantitative questions will be available on GCULearn. All students will be directed to further reading to support the theoretical and practical content of the module. Students will be required to research selected web-based and other sources to prepare for corporate finance lab sessions and seminars. This module is supported by the GCULearn website. Documents on the GCULearn will normally be in Power Point Format (PPT), if you require course materials in an alternative format due to a visual disability, you should please contact the module leader. Students can download the module handbook from the GCULearn. The Module Handbook can be found in 'Module Overview' and the lecture and seminar materials can be found under 'Learning Resources' sections of GCULearn. This module requires advance preparations, students are required to study the readings and attempt the seminar questions before class and seminars. Students are also expected to preview the lecture notes on GCULearn before lectures. Feedback strategy - aims Students will be provided with feedback within three weeks of submission. The feedback that they receive is designed to: 1. Facilitate the development of self-assessment; 2. Encourage dialogue; 3. Clarify good performance; 4. Provide opportunities to close the gap between current and desired performance; 5. Deliver high quality information about individual learning; 6. Encourage positive motivational beliefs and self-esteem; 7. Provide information to teachers that can be used to help shape the teaching. In order to achieve these aims, the following strategies will be adopted by this module: 1. Facilitating the development of self-assessment: The assessment requirements will be discussed in the introduction to the module. Students will be asked to reflect on the standard of their work. 2. Encouraging dialogue: Students are encouraged to discuss their comments with lecturers, arrange meetings with academic advisors to review performance. 3. Clarifying good performance: Students will be provided with information about marking criteria. They will also be provided with examples of assessments to review in order to identify and clarify good performance (as per A). 4. Providing opportunities to close the gap between current and desired performance: Students may find it helpful to identify actions points based on the feedback they have received. 5. Delivering high quality information about individual learning: Feedback will be provided within 3 weeks of submission, covering strengths, weaknesses and corrective advice. 6. Encouraging positive motivational beliefs and self-esteem: Feedback will be designed to encourage and be constructive. 7. Providing information to teachers that can be used to help shape the teaching: Students, if they wish, may identify where they are having difficulties when they hand in their assignments.

Indicative Reading

Books and articles: In addition to the main text, other texts, financial articles and web sites will be utilized on this module: Main texts: Hillier, D, Clacher, I, Ross, S, Westerfield, R and Jordan, B: Fundamentals of Corporate Finance Latest European Edition; McGraw-Hill Education Brealey R A, Myers S C and Marcus A., J, Fundamentals of Corporate Finance, (Latest Edition), McGraw-Hill. Indicative Readings Webb R and Brahma S; Financial markets and institutions, (2013) Pearson. Pike R and Neale B, Corporate Finance and Investment, Decisions and Strategies, (Latest Edition), Prentice Hall Megginson, W, Smart, S, and Lucy, B. Introduction to Corporate Finance, (latest Edition), South-Western McLaney E, Business Finance, Theory and Practice, (Latest Edition), FT Prentice Hall. Brealey R A, Myers S C, and Allen A, Principles of Corporate Finance, (Latest Edition), McGraw-Hill Financial sections of newspapers such as The Financial Times, and periodicals like the Economist, and the Investors Chronicle will be identified for reading on background issues and current developments. Company annual accounts and their web sites will be identified for information.

Transferrable Skills

Knowledge Specific Skills 1. An appreciation of the nature and the contexts in which finance can be seen as operating; 2.The different types of financial management decision; 3. The role of the financial manager; 4. Knowledge of the theories of Finance e.g. concept of operating leverage and capital budgeting criteria; 5. Sensitivity analysis, scenario analysis; 6. Accounting and break-even points; 7. Knowledge of the financing arrangements and governance structures of business entities; 8. An appreciation of how theory and evidence can be combined to assess the effectiveness and efficiency of a company's financing and investment decisions, amongst others. Cognitive Abilities and Generic Skills This module will develop the following skills in a manner that encourages analytical thinking and independent initiative: 1. Communication skills including the ability to present quantitative and qualitative information together with analysis, argument and commentary in a form appropriate to different intended audiences; 2.Ability to prepare simple financial models using Excel spreadsheets; 3. Capacity for independent and self-managed learning; 4. Numeracy skills, including the ability to manipulate financial and other numerical data and to appreciate finance concepts at an appropriate level.

Module Structure

Activity Total Hours
Lectures (FT) 24.00
Seminars (FT) 5.00
Independent Learning (FT) 124.00
Practicals (FT) 7.00
Assessment (FT) 40.00

Assessment Methods

Component Duration Weighting Threshold Description
Exam (Exams Office) 2.00 75.00 35% Unseen exam.
Exam (Dept) 01 1.50 25.00 35% Class Test - MCQs