BA 340 - Finance

Fall 2007

Professor Johnson Professor Romero

BA 340 will be taught by Professor Johnson. The honors section of BA340 will be taught by Professor Romero. Please use the hyperlinks shown above to reach the syllabus and other course materials for Professor Johnson, and go to the BA340H web page for Professor Romero’s materials.

Course Textbook

This quarter BA340 will be using a textbook exclusively available at the OSU Bookstore.

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.

Investment decisions

Financing decisions

Working capital management decisions

Financial analysis and planning

Fundamental Theories, Concepts, and Tools

Time Value of Money (TVM)

Explain the concepts of discounting and compounding.

Find the present value and future value for a single cash flow, series of cash flows, annuity, and perpetuity.

Develop a loan amortization schedule.

Calculate an APR (annual percentage rate) and an EAR (effective annual rate).

Use TVM to value assets such as common stock, preferred stock, and bonds.

Describe and explain the variety of interest rates.

Identify and explain the factors that determine interest rates and the yield curve.

The Relation between Risk and Return

Calculate the historical return average and standard deviation of the historical returns.

Calculate the expected return, standard deviation, and beta for a portfolio.

Explain diversification, and distinguish between "diversifiable risk" and "nondiversifiable" risk.

Describe "beta coefficient".

Describe how beta coefficients can be estimated from historical returns.

Understand and use the CAPM (SML) to calculate required rates of return.

Explain the efficient market hypothesis (EMH) and its implications for an optimal investment strategy

Financial Statements

Understand the information contained in an income statement, balance sheet, statement of retained earnings, and statement of cash flows.

Summarize the differences between debt and equity.

Financial Decisions

Investment Decisions (Capital Budgeting)

Recognize and calculate the relevant cash flows for a potential investment.

Calculate and interpret a net present value (NPV), an internal rate of return (IRR), and a payback period for a capital budgeting analysis.

Make capital budgeting decisions under conditions of capital rationing and mutually exclusive investments.

Explain how to account for inflation in a capital budgeting analysis.

Recognize and explain the weaknesses in the capital budgeting process.

Financing Decisions (Capital Structure)

Calculate and interpret a weighted average cost of capital (WACC).

Understand the effect of floatation costs on the cost of capital.

Define financial leverage, capital structure, and optimal capital structure.

Understand the effects of capital structure on the risk and return characteristics of a company's debt and equity financing.

Identify and explain factors that affect a firm's choice of capital structure:

tax benefit of debt

bankruptcy costs

other factors

Working Capital Management Decisions

Understand the issues involved in setting corporate policy concerning current assets and current liabilities.

Understand the cash conversion cycle and issues involved in managing the cash conversion cycle

Briefly explain the difference between permanent financing needs and seasonal financing needs.

Understand and be able to analyze the issues involved in setting credit standards and terms.

Briefly describe the sources available for short-term debt financing.

Financial Analysis and Planning

Identify and explain the major categories of financial ratios.

Calculate and interpret typical financial ratios.

Use financial ratios to analyze company performance.

Identify weaknesses in ratio analysis.

Calculate and interpret pro forma financial statements using % of sales method and / or specific information.

Identify the major reasons for estimating a pro forma financial statement.

COURSE POLICIES

1. Dates and terms for class withdrawal are as outlined in the OSU Course Schedule.

2. OSU student ID must be displayed for all exams.

3. During class lectures, please TURN OFF ALL CELL PHONES AND PAGERS.

4. See Statement of Expectations for Student Conduct at http://oregonstate.edu/admin/stucon/achon.htm

5. Students with Disabilities: Accommodations are collaborative efforts between students, faculty and Services for Students with Disabilities (SSD). Students with accommodations approved through SSD are responsible for contacting the instructor prior to or during the first week of the term to discuss accommodations. Students who believe they are eligible for accommodations but who have not yet obtained approval through SSD should contact SSC immediately at 737-4098.

6. Students are held responsible for all announcements and instructions delivered in class.