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BA 340 - Finance
Fall 2006
[Romero]
[Johnson]
BA 340 will be taught by Professors Romero and
Johnson during Fall 2006. Please use the hyperlinks shown above to reach the
syllabus and other course materials for your instructor.
Course Textbook
This
quarter BA340 will be using a textbook exclusively available at the OSU
Bookstore.
Textbook Name: Financial Management A
Modern Approach, Custom Edition, ISBN 0-536-98760-2, published by Pearson
Learning
This
text is preliminary edition, and as we find corrections, they will be listed on
this errata page.
Using a Financial Calculator
Calculator help is available
at Financial
Calculator Guide. Click on Using Business and Financial
Calculators and find your personal calculator. Instructions are available on
using basic financial functions.
Learning Objectives
·
Understand the
fundamental theories, concepts, and tools of finance.
·
Apply financial
management concepts and tools to the decisions faced by a manager.
o
Investment
decisions
o
Financing
decisions
o
Working capital
management decisions
o
Financial analysis
and planning
Fundamental Theories, Concepts, and Tools
- Time Value of Money (TVM)
o Explain the concepts of discounting and compounding.
o Find the present value and future value for a single cash flow, series of cash flows, annuity, and perpetuity.
o Develop a loan amortization schedule.
o Calculate an APR (annual percentage rate) and an EAR (effective annual rate).
o Use TVM to value assets such as common stock, preferred stock, and bonds.
o Describe and explain the variety of interest rates.
o Identify and explain the factors that determine interest rates and the yield curve.
- The Relation between Risk and Return
o Calculate the historical return average and standard deviation of the historical returns.
o Calculate the expected return, standard deviation, and beta for a portfolio.
o Explain diversification, and distinguish between "diversifiable risk" and "nondiversifiable" risk.
o Describe "beta coefficient".
o Describe how beta coefficients can be estimated from historical returns.
o Understand and use the CAPM (SML) to calculate required rates of return.
o Explain the efficient market hypothesis (EMH) and its implications for an optimal investment strategy
- Financial Statements
o Understand the information contained in an income statement, balance sheet, statement of retained earnings, and statement of cash flows.
o Summarize the differences between debt and equity.
Financial Decisions
- Investment Decisions (Capital Budgeting)
o Recognize and calculate the relevant cash flows for a potential investment.
o Calculate and interpret a net present value (NPV), an internal rate of return (IRR), and a payback period for a capital budgeting analysis.
o Make capital budgeting decisions under conditions of capital rationing and mutually exclusive investments.
o Explain how to account for inflation in a capital budgeting analysis.
o Recognize and explain the weaknesses in the capital budgeting process.
- Financing Decisions (Capital Structure)
o Calculate and interpret a weighted average cost of capital (WACC).
o Understand the effect of floatation costs on the cost of capital.
o Define financial leverage, capital structure, and optimal capital structure.
o Understand the effects of capital structure on the risk and return characteristics of a company's debt and equity financing.
o Identify and explain factors that affect a firm's choice of capital structure:
1. tax benefit of debt
2. bankruptcy costs
3. other factors
- Working Capital Management Decisions
o Understand the issues involved in setting corporate policy concerning current assets and current liabilities.
o Understand the cash conversion cycle and issues involved in managing the cash conversion cycle
o Briefly explain the difference between permanent financing needs and seasonal financing needs.
o Understand and be able to analyze the issues involved in setting credit standards and terms.
o Briefly describe the sources available for short-term debt financing.
- Financial Analysis and Planning
o Identify and explain the major categories of financial ratios.
o Calculate and interpret typical financial ratios.
o Use financial ratios to analyze company performance.
o Identify weaknesses in ratio analysis.
o Calculate and interpret pro forma financial statements using % of sales method and / or specific information.
o Identify the major reasons for estimating a pro forma financial statement.