FINC 350 A Business Finance

Transcription

1 Columbia College Online Campus P a g e 1 FINC 350 A Business Finance June 1, 2015 Session (14-55) Monday, June 1, 2015 Saturday, July 25, 2015 Course Description A study of the finance function in corporate decision-making. Topics include financial statement analysis, risk and return, valuation, cost of capital, working capital management, time value of money, and capital budgeting. Prerequisite: ACCT 281, MATH 150 or MATH 170 Proctored Exams: None Textbooks Stanley B. Block, Geoffrey A. Hirt and Bartley R. Danielson (2014), Foundations of Financial Management With Time Value of Money, McGraw-Hill Irwin, 15 th edition. ISBN: Benjamin Graham and Spencer Meredith. (1998). Interpretation of Financial Statements, Harper Business. ISBN: Textbooks for the course may be ordered from MBS Direct. You can order online at (be sure to select Online Education rather than your home campus before selecting your class) by phone at For additional information about the bookstore, visit Course Overview Welcome to FINC 350 Business Finance, online! Upon completion of this course you should have and be able to demonstrate a working knowledge of theories, methods and procedures used in analyzing the financial management of a firm. In addition, when we are finished you should be cognizant of new developments and trends within the field of finance.

2 Columbia College Online Campus P a g e 2 Each week we will focus on a different area of our subject. Using online conferencing discussions we will delve into the intricacies of our subject and expand upon and reinforce particularly relevant issues with readings from our text, Foundations of Financial Management, and other sources. Technology Requirements Participation in this course will require the basic technology for all online classes at Columbia College: A computer with reliable Internet access, a web browser, Acrobat Reader, Microsoft Office or another word processor such as Open Office. You can find more details about standard technical requirements for our courses on our site. Course Objectives To demonstrate a working knowledge of theories, methods and procedures used in analyzing the financial management of a firm. Measurable Learning Outcomes Grading Develop the analytical skills necessary of financial decision-making based on an understanding of the factors that impact financial decision-making, implementation and evaluation. Analyze financial statements and interpret financial ratios to assess company performance. Explain how a firm s operating, financing, and investment decisions are reflected in their financial reports. Describe the importance of effective working capital management. Explain the term structure of interest rates and the relationship between risk and return. Apply the principles of the time value of money to single and multiple cash flows and value corporate securities. Integrate expected rates of return and the firm s capital structure to calculate and evaluate the firm s cost of capital. Describe and explain the way in which investment projects are analyzed including the impact of risk, taxes, and inflation and apply techniques of capital budgeting. Grading Scale GRADE POINTS PERCENT A B C Grade Weights ASSIGNMENT POINTS PERCENT Discussion 80 8 Homework Problems Quizzes

3 Columbia College Online Campus P a g e 3 D F Project Total Schedule of Due Dates WEEK ASSIGNMENT POINTS DUE DAY 1 Discussion (Introductions) None Tuesday Discussion #1 10 Friday Project Financial Statements 25 Sunday 2 Discussion #2 10 Friday Week Two Quiz 150 Sunday 3 Discussion #3 10 Friday Project History & Background 25 Sunday 4 Discussion #4 10 Friday Week Four Quiz 150 Sunday 5 Discussion #5 10 Friday Project Financial Analysis 50 Sunday 6 Discussion #6 10 Friday Week Six Quiz 150 Sunday 7 Discussion #7 10 Friday Project Summary & Recommendations 100 Sunday 8 Discussion #8 10 Friday

4 Columbia College Online Campus P a g e 4 Week Eight Quiz 150 Saturday TOTAL 1000 Assignment Overview Each student is responsible for: Regular contact with the instructor and other students. Weekly reading assignments. Weekly Discussion. Weekly Homework Problems. Four Quizzes. One Project. For each weekly topic, I expect at least three substantive postings that have the effect of moving the discussion forward. Each weekly topic requires a main posting and at least two postings that respond to other students, and they should occur on at least three separate days. Your initial post is due by Tuesday and responses to your classmates by Friday. Grades will be based on the punctuality and the quality of your responses. Discussion postings should be submitted to the appropriate topic in the Discussions area of the course. Homework Problems assignments can be found in the Quizzes area of the course. You will submit your answers via the Quizzes area of the course (there is no time limit other than the Saturday deadline), so that you can see the answers and get feedback immediately on your responses. Homework assignments must be submitted by Saturday at midnight each week. Quizzes: There will be four quizzes in this course that will be composed of 40 multiple-choice items that test your knowledge of the material covered in the course. Again, there is no time limit other than the Sunday due day. They are available in the Quizzes area of the course. Project: You will receive feedback on the components of the project as they are submitted and can use this feedback to revise until your final submission of the project. A full explanation of expected content of the final project submission appears in the Course Content area. Remember that the final submission must encompass all of what you regard as information relevant to your recommendation as to which company should be the investment target. Project assignments should be submitted to the appropriate folder in the Dropbox area of the course. Course Schedule Week 1 Getting Acquainted, Getting Started Read Chapters 1, 2 and 14 of the textbook. View the material in Week 1 of the Content area, particularly the web sites and other multimedia resources in the class. Class Activities: View the course Syllabus and get comfortable with what is expected of you. To begin, let s introduce ourselves and become acquainted with our web-based course. Tour the college s Web site at Sign in and browse the Columbia College site to get familiar with the layout of the course. Make sure you visit the Columbia College Library online and check out the financial research resources available there, especially Standard & Poor s and the Value Line Investment Service. Become comfortable with the techniques of posting to the Discussion and the Dropbox, with management (using your browser's capability), and the available diagnostic tools. Finally, begin to build a "portfolio" of resources of your own, including your bookmarks, newsgroups, proprietary and open access databases. This portfolio will come in handy for future web-based business courses.

5 Columbia College Online Campus P a g e 5 Introductions: This first week I want you to take the time to introduce yourself to the class in the Discussion area of our "virtual classroom." Please give us more than your name. Include your occupation, hobbies, interests, and career objectives. There is no credit for this but it is required. Discussion Topic: What exactly does it mean to say that the goal is to maximize shareholder wealth? Obviously, we mean maximize shareholder wealth in a manner consistent with the law, but does a corporation have other stakeholders besides its shareholders? Who comes first? What does the law require? by Saturday of this week. Project: Decide which pair of companies you will be analyzing for your final project. You must pick a pair of companies from the four pairs of companies listed in the Project material in the Content area. Do some research on the two companies. In particular, look for their most recent financial statements. Next week we get into financial statement analysis in a much deeper way, but for now calculate a few simple ratios, like the book value per share, current ratio and net profit margin on sales. Write a brief description of your findings and post it to the appropriate Dropbox. Your paper should be 3-4 pages of your own written material. A cover page and reference page per APA is required but not part of the page count. Week 2 Financial Statement Analysis & Working Capital Management Chapters 3 through 6 in the text. View the material in Week 2 of the Content area, particularly the web sites and other multimedia resources. Financial analysis (called security analysis on Wall Street) can be less than totally objective. How big a problem do you think this is? What can be done to manage potential conflicts of interest? Maybe we just have to live with them and search out the hidden agendas. What do you think? How do you react to Sarbanes Oxley? Does regulation work? If you think it does, how did Madoff happen, or ENRON? Before you post you might want to re-read the Finance in Action item on page 68. Quiz: Take the first quiz. It can be accessed in the Quizzes area of the course. Project: Continue working on your Project. Week 3 The Time Value of Money Read Chapters 9 and 10 in the text. View the material in Week 3 of the Content area, particularly the web sites and other multimedia resources. In 1965, Warren Buffett acquired control of a New England textile business called Berkshire Hathaway for about $10 a share. Today the stock sells for around $120,000 a share and Mr. Buffett is the wealthiest person in the United States. The stock has never paid a dividend and as long as Mr. Buffett is in charge it probably never will. How does this fit the theory that the value of a stock is based on the present value of the expected future stream of dividends? Visit and get familiar with the company. Tell me what you think the future holds for the company. Read his letters to his shareholders (accessible through the link provided in the Assignments topic of the Content Area) and what he calls the Berkshire Hathaway owner s manual (also in the Assignments topic of the Content

6 Columbia College Online Campus P a g e 6 Area). In an age of hi-tech why did he recently buy the Burlington Northern Railroad for $44 billion? How will the company fare after his inevitable departure? Project: This week I want you to do some research on the history of the two companies and then write a paper that tells me what you have learned. What do they have in common? How are the businesses different? This will take some deep digging. A little ancient history is alright but concentrate on the last ten years. Post your paper to the appropriate dropbox. Your paper should be 4-5 pages of your own written material. A title page and reference page should be included but not as part of the page count. Follow APA format. Week 4 Bond & Stock Valuation Review Chapter 10 and preview Chapters 16 and 17 in the text. View the material in Week 4 of the Content area, particularly the web sites and other multimedia resources. What is the right price for a stock? Is it book value, liquidation value or simply its market price at a given moment in time? Would you value a privately-owned company where there is no quoted market value differently than a publicly owned company where there is a market price every day? Is there a difference between price and value? This is a deeper question than you think, so think deep. It will get even deeper in Week Eight if you are really curious. Quiz: Take the second quiz. It can be accessed in the Quizzes area of the course. Project: Continue working on your Project. Week 5 Capital Budgeting Chapters 11, 12 and 13. View the material in Week 5 of the Content area, particularly the web sites and other multimedia resources. A frequent criticism of the management of publicly-owned American companies is that they are too short-term oriented, too focused on fast returns, and that this negatively impacts their long term capital budgeting. Can you suggest a company, or industry, where this appears to be true. Why? How? Do the recent problems at Toyota suggest that the problem is spreading to other countries? How do we keep an emphasis on the long term from becoming an excuse for continued poor results is the short term. Project. Now is the time to do the detailed Financial Analysis of our two companies in preparation for submitting your recommendations in Week Seven. Make sure you calculate all of the appropriate ratios called for in the Project and be sure to provide at least five years of ratios. Use the Financial Statements for the most recent fiscal year filed with the SEC and for earlier periods look at Value Line (available in the Stafford Library) and at sites like Yahoo Finance. They can also generally be found on the company websites. Tell me what they mean to you. That will help you focus on the recommendation you are going to make in two weeks. This should be a 6-9 page paper with detailed discussion and analysis and critical thought. If you just provide a cut and paste of financials as your answer, it will receive a failing grade. You will need to show that you truly understand the various ratios and financials by examining and detailing and contrasting the information. It is best to take at least 6 ratios or more and compare the two firms as well as compare the two firms to the industry.

7 Columbia College Online Campus P a g e 7 Week 6 Risk, Return, and the Cost of Capital Read Appendix 11A in Chapter 11 and review Chapter 13 and the material in the course Content area for Week 6, particularly the web sites and other multimedia resources. This will be a real challenge, but it should be an interesting challenge. Much of the way we measure risk relies on probability distribution (the Bell Curve as shown on page 425). For many things in life, and business, this is perfectly valid, but for others it is not. Can you come up with some illustrations of business risk measurement where the Bell Curve is inappropriate? This will take a little research on the internet. Why may the Bell Curve be an inappropriate tool for looking at market risk? Find out what Mandelbrot (The Mis Behavior of Markets) and Taleb (The Black Swan) have to say. Quiz: Take the third quiz, which can be accessed in the Quizzes area of the course. Project: Continue working on your Project. Course Evaluations: Please evaluate the course. You will be able to submit your course evaluation between Sunday of Week 5 and Thursday of Week 7. A link will be sent to your CougarMail that will allow you to access the evaluation. Week 7 Cost of Capital and Common Stock Chapters 11, 13 (again, but this time we go deeper) and 17. In this week s discussion we will touch lightly on EVA. Some major companies live and die by EVA. For example, at General Electric, more capital is allotted only to divisions that pass the EVA threshold, and divisions that regularly flunk are sold off. It s a simple, but powerful, approach that looks at a company s numbers from an economist s point of view and factors in not just explicit costs but also implicit costs in measuring a firm s profitability. T a k e a l o o k a t and and tell us what you think Project: You have finished the project and now it is time to bring it all together. I expect one final long paper containing your recommendations, concerns, thoughts, and conclusions and the evidence to support those conclusions. The report should begin with an Executive Summary explicitly making a recommendation and enumerating your reasons. Which is the more promising business? Which is the better buy? The best company isn t always the best value. Post your project to the appropriate Dropbox. Your paper should combine all of the previous material that you deem relevant and address the issues mentioned above. Submit one final paper which should be pages in length including a one to two page Executive Summary. If you have sets of financial statements you want to include, they should appear as an appendix to the paper. Week 8 Why do Good CFOs Make So Much Money? Chapters 14 through 18 View the Berkshire Hathaway Owners Manual. ( Should we care about Executive Compensation or how much hedge fund managers earn? How should incentive compensation be changed? Should it be changed? Who can change it? Southwest Airline s CFO hedged fuel prices and saved the company hundreds of millions of dollars. Why was he alone in the industry in doing so? John Paulsen made his partners $20 billion dollars during the financial crisis by correctly forecasting the housing market and the problems in the banking industry. They paid him over $4 billion for his work. Too much, or none of our business?

8 Columbia College Online Campus P a g e 8 Quiz: Take the fourth Quiz, which can be accessed in the Quizzes area of the course. This week it is due on Saturday. Course Policies Student Conduct All Columbia College students, whether enrolled in a land-based or online course, are responsible for behaving in a manner consistent with Columbia College's Student Conduct Code and Acceptable Use Policy. Students violating these policies will be referred to the office of Student Affairs and/or the office of Academic Affairs for possible disciplinary action. The Student Code of Conduct and the Computer Use Policy for students can be found in the Columbia College Student Handbook. The Handbook is available online; you can also obtain a copy by calling the Student Affairs office (Campus Life) at The teacher maintains the right to manage a positive learning environment, and all students must adhere to the conventions of online etiquette. Plagiarism Your grade will be based in large part on the originality of your ideas and your written presentation of these ideas. Presenting the words, ideas, or expression of another in any form as your own is plagiarism. Students who fail to properly give credit for information contained in their written work (papers, journals, exams, etc.) are violating the intellectual property rights of the original author. For proper citation of the original authors, you should reference the appropriate publication manual for your degree program or course (APA, MLA, etc.). Violations are taken seriously in higher education and may result in a failing grade on the assignment, a grade of "F" for the course, or dismissal from the College. Collaboration conducted between students without prior permission from the instructor is considered plagiarism and will be treated as such. Spouses and roommates taking the same course should be particularly careful. All required papers may be submitted for textual similarity review to Turnitin.com for the detection of plagiarism. All submitted papers may be included in the Turnitin.com reference database for the purpose of detecting plagiarism. This service is subject to the Terms and Conditions of Use posted on the Turnitin.com site. Please refer to the plagiarism tutorial that can be found in your course content area in D2L. Non-Discrimination There will be no discrimination on the basis of sex, race, color, national origin, sexual orientation, religion, ideology, political affiliation, veteran status, age, physical handicap, or marital status. Disability Services Students with documented disabilities who may need academic services for this course are required to register with the Coordinator for Disability Services at (573) Until the student has been cleared through the disability services office, accommodations do not have to be granted. If you are a student who has a documented disability, it is important for you to read the entire syllabus before enrolling in the course. The structure or the content of the course may make an accommodation not feasible. Online Participation You are expected to read the assigned texts and participate in the discussions and other course activities each week. Assignments should be posted by the due dates stated on the grading schedule in your syllabus. If an emergency arises that prevents you from participating in class, please let your instructor know as soon as possible. Attendance Policy

9 Columbia College Online Campus P a g e 9 Attendance for a week will be counted as having submitted a course assignment for which points have been earned during that week of the session or if the proctoring information has been submitted or the plagiarism quiz taken if there is no other assignment due that week. A class week is defined as the period of time between Monday and Sunday (except for Week 8, when the week and the course will end on Saturday at midnight). The course and system deadlines are all based on the Central Time Zone. Cougar All students are provided a CougarMail account when they enroll in classes at Columbia College. You are responsible for monitoring from that account for important messages from the College and from your instructor. You may forward your Cougar account to another account; however, the College cannot be held responsible for breaches in security or service interruptions with other providers. Students should use for private messages to the instructor and other students. The class discussions are for public messages so the class members can each see what others have to say about any given topic and respond. Late Assignment Policy An online class requires regular participation and a commitment to your instructor and your classmates to regularly engage in the reading, discussion and writing assignments. Although most of the online communication for this course is asynchronous, you must be able to commit to the schedule of work for the class for the next eight weeks. You must keep up with the schedule of reading and writing to successfully complete the class. Late postings to Discussion topics are not accepted. Other work posted after the due date is subject to at least a 50% reduction in grade. Course Evaluation You will have an opportunity to evaluate the course near the end of the session. Course evaluations will open on Sunday of Week 5 and remain open until Thursday of Week 7. A link will be sent to your CougarMail that will allow you to access the evaluation. Be assured that the evaluations are anonymous and that your instructor will not be able to see them until after final grades are submitted. Additional Resources Orientation for New Students This course is offered online, using course management software provided by Desire2Learn and Columbia College. The Student Manual provides details about taking an online course at Columbia College. You may also want to visit the course demonstration to view a sample course before this one opens. Technical Support If you have problems accessing the course or posting your assignments, contact your instructor, the Columbia College Helpdesk, or the D2L Helpdesk for assistance. Contact information is also available within the online course environment. CCHelpDesk@ccis.edu ex helpdesk@desire2learn.com Online Tutoring Smarthinking is a free online tutoring service available to all Columbia College students. Smarthinking provides real-time online tutoring and homework help for Math, English, and Writing. The Writing

10 Columbia College Online Campus P a g e 10 Center can be used for writing assistance in any course. Smarthinking also provides access to live tutorials in writing and math, as well as a full range of study resources, including writing manuals, sample problems, and study skills manuals. You can access the service from wherever you have a connection to the Internet. I encourage you to take advantage of this free service provided by the college. Access Smarthinking through CougarTrack under Students->Academics->Academic Resources. Grading Criteria Discussion Grading Criteria Criteria Description Points Initial Post Responses Initial post submitted by midnight on Tuesday. Posting answers the question posed or provides substantive comments on the issue and reflects an understanding of the readings. Reponses to at least two classmates are posted by midnight on Friday. Responses are posted on separate days. (Logging in and posting all three posts on the same day will not demonstrate substantive engagement with your classmates.) Responses are substantive and help to advance the discussion by reflecting what is of value in another s post or by posing questions to engage classmates in further discussion. 5 5 Project Grading Criteria Criteria Description Points Ideas Central idea/thesis is clearly communicated; analysis is clear and logical. 40 Organization Supporting Data Uses a logical structure; sophisticated transitional sentences guide the reader through the chain of reasoning. Uses evidence appropriately and effectively, providing sufficient evidence and explanation to convince. Accuracy Calculations are accurate. 50 Mechanics Almost entirely free of spelling, punctuation, and grammatical errors Punctuality Each component and the final project are submitted on time. 20