JEFFERSON COLLEGE COURSE SYLLABUS

Transcription

1 JEFFERSON COLLEGE COURSE SYLLABUS MGT 262 FINANCIAL MANAGEMENT 3 Credit Hours Prepared by Don Boyer Revision Date: May 2002 by Don Boyer CAREER & TECHNICAL EDUCATION Alan C. Foster, Associate Dean

2 MGT 262 FINANCIAL MANAGEMENT I. CATALOG DESCRIPTION Prerequisite: MGT151 Retailing 3 semester hours credit Financial Management develops a conceptual understanding of investment and financial decisions toward maximizing the business owner's wealth. The students are exposed to the environment in which financial decisions are made and examine the analytical techniques used in finance. II. GENERAL COURSE OBJECTIVES This course involves an examination of finance as an integral part of an organization. It encompasses many of the tools and techniques used by financial managers to make sound financial decisions. The major objectives of the course are: A. To develop a conceptual framework within which the firm's investments and financing decisions may be examined in light of shareholder wealth maximization. B. To become familiar with the analytical techniques of finance. C. To become aware of the institutional framework of the money and capital markets and the nature of financial claims exchanged therein, thereby providing a solid understanding of the environment in which financial decisions are made. D. To develop the environment of business finance with respect to its importance in relation to production, distribution and other functions within an organization. E. To stress the importance of the time value of money and credit within our economic system. III. COURSE OUTLINE PART 1: THE WORLD OF FINANCE A. Finance and the Firm 1. a. Examine the goals of Financial Management. b. Describe the different functions and duties of a financial manager. c. Explore the different forms of business organization including: sole proprietorship, partnership, limited partnership, corporation, and subchapter S corporation. d. Examine the factors in the outside environment that has a major impact upon financial decisions. B. Financial Markets and Interest Rates 1. a. Examine the financial system and the role of financial intermediaries within that system. b. Describe the different types of markets that are a part of the financial system including the primary market, secondary market, money market, and capital markets.

3 c. Become aware of the different types of security exchanges including the Over- the- Counter Exchange. d. Examine the different types of securities within each market. e. Examine Interest and the factors that affect interest rates. C. Stock Market Practice Set 1. a. Examine the framework of the stock market. b. Describe the process a corporation goes through to issue new shares of stock. c. Define the primary market and the secondary market. d. Define an Investment Banking House. e. Examine the three major stock exchanges: NYSE, AMEX, and NASDAQ. f. Examine the stock quotations in the Wall Street Journal and define each column in the quotation. g. Become aware of the publications that are available to assist investors in making investment decisions. h. Invest $20,000 of imaginary money in two stocks and keep a weekly record of the stocks' value throughout the semester. D. Financial Institutions 1. a. Examine the role of the various financial institutions including Commercial Banks, Savings and Loan Associations and Credit Unions. b. Describe the Federal Reserve System and the impact it has on the Economy. E. Review Financial Markets, Institutions, Interest Rates and the Stock Market PART 2: ESSENTIAL CONCEPTS IN FINANCE F. Accounting Principles and Financial Statements 1. a. Evaluate an Income Statement, Balance Sheet, and Cash Flow Statement and explain the importance of each. b. Define depreciation expense and the impact of depreciation on taxable income. c. Determine corporate tax rates at different profit levels. d. Calculate the Tax Liability, Marginal Tax Rate, and Average Tax Rate at different profit levels. G. Review Accounting and Financial Statements H. Analysis of Financial Statements 1. a. Identify the five ratio classifications: Profitability, Asset Activity, Liquidity, Debt, and Market Value Ratios.

4 b. Evaluate the information that can be derived from each classification and the importance of each ratio to financial management. c. Explain the impact that inflation can have on financial analysis. d. Explain the impact of long-term or short-term debt on financial analysis. e. Calculate each ratio with information from an income statement and a balance sheet. I. Review Ratio Analysis J. Forecasting for Financial Planning 1. a. Analyze the information needed to prepare a sales forecast and the role it plays in preparing projected financial statements. b. Examine the techniques used in preparing projected financial statements. c. Prepare a pro-forma Income Statement and Balance Sheet. K. Risk and Return 1. a. Examine the risk-return relationship and the tools used to measure financial risk. b. Identify the types of risk corporations and other business firms encounter. c. Describe the different methods used by business to reduce financial risk. L. The Time Value of Money 1. a. Examine the concept of compound interest. b. Define the Future Value and the Present Value of money. c. Define an annuity; both an ordinary annuity and an annuity due. d. Examine the factors involved with the time value of money and determine the proper method to use in order to calculate these factors. e. Calculate the future value of an amount by using the table method and the formula method. f. Calculate the present value of an amount by using the table method and the formula method. g. Calculate the Future Value and the Present Value of an Annuity. M. Review Forecasting, Risk & Return and the Time Value of Money

5 N. Valuation and Rates of Return 1. a. Describe the difference between Preferred Stock, Common Stock, and Bonds. b. Examine the framework of each of these securities. c. Determine the present value of a bond when specific factors are known. d. Determine the present value of Preferred Stock and Common Stock. e. Calculate the market's rate of return on both Preferred Stock and Common Stock. f. Determine the Yield to Maturity on a Bond by using interpolation. O. Review Stock and Bond Valuation models PART 3: LONG TERM FINANCIAL MANAGEMENT DECISIONS P. Capital Structure Basics 1. a. Define Break Even Analysis and the importance of determining a break even point. b. Define Operating Leverage, Financial Leverage, and Combined Leverage. c. Calculate the degree of operating leverage, the degree of financial leverage, and the degree of combined leverage. d. Examine the impact of sales volume on Operating Leverage. e. Examine the impact of interest expense on Financial Leverage. PART 4: SHORT TERM FINANCIAL MANAGEMENT DECISIONS Q. Managing Cash 1. a. Examine the factors involved with cash management such as Float, Credit Policies, Collection Methods. b. Identify methods used in determining the optimal cash balance. c. Examine the methods used in the Forecasting of Cash needs and the development of a cash budget. d. Identify methods used in increasing and the speeding up of cash inflows and the decreasing and slowing down of cash outflows. R. Accounts Receivable and Inventory 1. a. Examine the factors involved with managing accounts receivable and the methods used to decrease the time involved with collections. b. Examine the factors involved with inventory management.

6 c. Define carrying costs, ordering costs, and the Economic Order Quantity. d. Calculate the EOQ when given specific variables. e. Determine the importance of safety stock and define Just-In-Time Inventory Management. S. Review short term asset management IV. UNIT OBJECTIVES PART 1: THE WORLD OF FINANCE 1. Define finance and financial management. 2. Describe the duties of a financial manager. 3. Describe the goals of financial management.

7 4. Describe the different forms of business organization. 5. Become familiar with the stock market through a practice set. 6. Evaluate a stock quotation from the Wall Street Journal. PART 2: ESSENTIAL CONCEPTS IN FINANCE 1. Evaluate an income statement and balance sheet. 2.Derive specific conclusions from information found on the income statement and balance sheet. 3. Define ratio analysis and its importance to a financial manager. 4. Define the four classifications for ratios. 5. Calculate profitability, asset management, liquidity, and debt ratios from financial statements. 6. Define the time value of money. 7. Explain the future value and present value of money. 8. Define an annuity. 9. Calculate the future value of a single sum. 10. Calculate the present value of a single sum. 11. Calculate the future and the present value of an annuity 12. Identify steps in preparing pro-forma financial statements. 13. Identify elements that impact the risk-return relationship 14. Calculate the present value of a bond. 15. Calculate the present value of preferred stock and common stock. 16. Calculate the markets rate of return. 17. Calculate the rate of return by using interpolation. PART 3: LONG TERM FINANCIAL MANAGEMENT DECISIONS 1. Define operating leverage, financial leverage and combined leverage. 2. Calculate the break-even point for a business. 3. Calculate the degree of operating leverage, financial leverage and combined leverage. 4. Define factors that influence leverage. PART 4: SHORT TERM FINANCIAL MANAGEMENT DECISIONS 1. Define the factors involved with Cash Management 2. Describe methods used in controlling Cash Flow 3. Define float money. 4. Describe the different methods used in improving collections. 5. Describe the factors involved with accounts receivable management. 6. Explain the costs involved with inventory management. 7. Define the Economic Order Quantity. V. METHOD(S) OF INSTRUCTION A.Lecture B.Overhead Transparencies C.Handouts

8 VI. REQUIRED TEXTBOOK(S) FINANCIAL MANAGEMENT, PRINCIPLES AND PRACTICE (2nd edition) Timothy J. Gallagher, Joseph D. Andrew. Jr. Prentice Hall ISBN VII. REQUIRED MATERIALS Notebook, paper, pencil, pen, calculator VIII. SUPPLEMENTAL REFERENCES Newspapers, Periodicals IX. METHOD OF EVALUATION Six exams including the Final Exam Announced quizzes Attendance (Each test is weighted differently) (Each quiz is weighted differently) (20% of Grade)