Required: Financial Calculator, Textbook and Computerized Homework Manager

Transcription

1 COURSE INFORMATION Course Prefix/Number: BAF 201 Course Title: Principles of Finance Lecture Hours/Week: 3.0 Lab Hours/Week: 0.0 Credit Hours/Semester: 3.0 VA Statement/Distance Learning Attendance Textbook Information Student Code and Grievance Policy Attendance Statement ( ) COURSE DESCRIPTION This course is an introductory course to the field of finance. The monetary and credit systems are examined along with how the demand for funds is met in both the public and private sectors. COURSE COMPETENCIES Required: Financial Calculator, Textbook and Computerized Homework Manager Upon successful completion of this course, the student should be competent to perform the following tasks. Module 1: The Goals Financial Management, Time Value of Money, Financial Markets Explain what finance entails and why everyone should have an understanding of basic financial concepts. Identify different forms of business organization as well as the advantages and disadvantages of each. Identify major goal(s) that firms pursue and what a firm s primary goal should be. Explain the roles that ethics and good governance play in successful businesses. Describe how foreign firms differ from U.S. firms and identify factors that affect financial decisions in multinational firms. Describe the basic financial information that is produced by corporations and explain how the firm s stakeholders use such information. Describe the financial statements that corporations publish and the information that each statement provides. Describe how ratio analysis should be conducted and why the results of such an analysis are important to both managers and investors. Discuss potential problems (caveats) associated with financial statement analysis. Describe how various financial markets are differentiated. Discuss the role that an investment banking house plays in the financial markets. BAF of 5 Revised 12/2015

2 Describe the role that financial intermediaries play in the financial markets, and explain why there are so many different types of intermediaries and compare domestic intermediaries to international intermediaries. Discuss why working capital is needed and how working capital accounts are related. Describe the cash conversion cycle and how it can be used to better manage working capital activities. Describe the policies that a firm might follow (a) when investing in current assets and (b) when financing current assets. Discuss the advantages and disadvantages of using short-term financing rather than long-term financing. Module 2: Interest, Risk, Bond & Stock Valuation Identify various types of cash flow patterns (streams) seen in business. Compute (a) the future value of different cash flow streams. Explain the results. Compute the present value of different cash flow streams. Explain the result. Compute (a) the return (interest rate) on an investment (loan) and (b) how long it takes to reach a financial goal. Explain the difference between the annual percentage rate (APR) and the effective annual rate (EAR). Explain when each is more appropriate to use. Compute (a) amortized loan payments and (b) the amount that must be paid on an amortized loan at a specific date during the life of the loan. Determine the cost of money and factors that affect the cost of money (interest rates). Describe how interest rates are determined. Describe a yield curve and discuss how a yield curve might be used to determine future interest rates. Discuss how government actions and general business activity affect interest rates. Describe how changes in interest rates (returns) affect the values of stocks and bonds. Describe the basic characteristics of debt and some of the different types of debt. Discuss bond ratings and the information that they provide to investors. Explain how bond prices are determined. Explain how bond yields (market rates) are determined. Describe the relationship between bond prices and interest rates, and explain why it is important for investors to understand this relationship. Explain what equity is, and identify some of the features and characteristics of (a) preferred stock and (b) common stock. Describe how stock prices (values) are determined when (a) dividends grow at a constant rate and (b) dividend growth is nonconstant. Describe some approaches (techniques) other than strict application of time value of money models that investors use to value stocks. Identify factors that affect stock prices. Explain what it means to take risk when investing. Compute the risk and return of an investment, and explain how the risk and return of an investment are related. Identify relevant and irrelevant risk, and explain how irrelevant risk can be reduced. Describe how to determine the appropriate reward that is, rate of return that investors should earn for purchasing an investment. Describe actions that investors take when the return they require to purchase an investment is different from the return they expect the investment to produce. BAF of 5 Revised 12/2015

3 Identify different types of risk, and classify each as relevant or irrelevant with respect to determining an investment s required rate of return. Module 3: Financial Forecasting, Cost of Capital, and Capital Budgeting Describe the importance of capital budgeting decisions and the general process that is followed when making investment (capital budgeting) decisions about fixed assets. Describe how the net present value (NPV) technique and the internal rate of return (IRR) technique are used to make investment (capital budgeting) decisions. Compare the NPV technique with the IRR technique, and discuss why the two techniques might not always lead to the same investment decisions. Describe how conflicts that might arise when using the NPV and IRR techniques can be resolved by using the modified internal rate of return (MIRR) technique. Describe other capital budgeting techniques used by businesses to make investment decisions and which techniques are used most often in practice. Describe the relevant cash flows that must be forecast to make informed capital budgeting decisions. Identify the relevant cash flows and perform a capital budgeting analysis for (a) an expansion project and (b) a replacement project. Describe how the riskiness of a capital budgeting project is evaluated and how the results are incorporated in capital budgeting decisions. Describe how capital budgeting decisions differ for firms that have foreign operations and for firms that only have domestic operations. Describe how business risk and financial risk can affect a firm s capital structure. Describe how businesses determine their optimal capital structures. Describe how leverage can be used to make capital structure decisions, and discuss the effects (a) operating leverage, (b) financial leverage, and (c) total leverage have on risks associated with a firm. Discuss how managers consider liquidity when determining the optimal capital structure for a firm. Discuss the two general theories (a) trade-off theory and (b) signaling theory that have been developed to explain what firms capital structures should be and why firms capital structures differ. Describe how and why capital structures vary among firms in the United States and around the world. Module 4: Financial Leverage, Dividend Policy, Asset Management Describe the views that have been proposed to explain why firms follow particular dividend policies and why investors react when firms change dividend policies. Discuss (a) the types of dividend payments and (b) payment procedures that firms follow in practice. Discuss factors that firms consider when making dividend policy decisions. Describe stock dividends and stock splits, and discuss how stock prices are affected by these activities. Describe stock repurchases and discuss reasons firms use repurchases. Discuss differences in dividend polices around the world. Discuss the goal of effective cash management and how (a) the cash budget, (b) techniques that exist to accelerate cash receipts, and (c) cash disbursement controls should be employed to develop an optimal cash management policy. BAF of 5 Revised 12/2015

4 Explain the rationale for holding marketable securities, and describe the general characteristics of investments that should be included in portfolios of marketable securities. Discuss accounts receivable (credit) management, and describe how a proposed credit policy change should be evaluated. Explain the rationale for holding various forms of inventory, and describe how a firm can determine its optimal level of inventory. Describe how management of current assets differs for multinational firms and for purely domestic firms. Describe the characteristics of the various sources of short-term credit, including (a) accruals, (b) trade credit, (c) bank loans, and (d) commercial paper. Discuss and compute the cost (both APR and) of short-term credit. Describe the procedures and benefits of using (a) accounts receivable and (b) inventory to obtain secured short-term loans. Construct simple pro forma financial statements that can be used to forecast financing and investment needs. Discuss some of the complications that management should consider when constructing pro forma financial statements. Describe and compute (a) operating breakeven and operating leverage, (b) financial breakeven and financial leverage, and (c) total leverage. Discuss how knowledge of leverage is used in the financial forecasting and control process and why financial planning is critical to firm survival. MINIMUM STANDARDS A student with an overall average score of 60% or better will receive three hours credit for the course with a grade of D. An overall average score of 70% is a grade of C. Some programs including all business administration majors require a C to fulfill the requirements for the degree. Check the York Technical College Catalog and Handbook for grade requirements for particular majors. COURSE REQUIREMENTS Academic Integrity The policies stated in the York Technical College Handbook will be enforced. Any student violating these policies will be subject to academic discipline. Other Requirements Attend class and be on time to class Read and study assigned chapters Complete assigned homework problems and exercises. Participate in classroom activities and discussions. Take all module assessments when scheduled. Purchase Required Computerized Homework Manager EVALUATION STRATEGIES AND GRADING Four module assessments will count 80% of the final grade. Homework will count 10% of the final grade. Also, the learning outcomes project will count 10% of the final grade. All work (module tests, homework, and project) must be completed by the assigned dates. If a student BAF of 5 Revised 12/2015

5 withdraws from class by midterm, a grade of W will be assigned. If a student is withdrawn from a course and the last date of attendance is after midterm, the grade may be a W or a WF. Course Grades will be determined as follows: Module 1 Assessment Score... 20% Module 2 Assessment Score... 20% Module 3 Assessment Score... 20% Module 4 Assessment Score... 20% Homework... 10% Project... 10% Total Scores % The following scale will be the standard: Grade Range A B C D F Below 60 Withdrawal before midterm W ENTRY LEVEL SKILLS In order to be successful in BAF 201, the student should have skills in math concepts to include: fractions; fraction to decimal conversion, percentage computation, and basic algebra. In addition, the student should have an understanding of principles of accounting, especially the financial statements. PREREQUISITES MAT 101 CO-REQUISITES ACC 102 DISABILITIES STATEMENT Any student who feels s/he may need an accommodation based on the impact of a disability should contact the Special Resources Office (SRO) at in the 300 area of Student Services. The SRO coordinates reasonable accommodations for students with documented disabilities. BAF of 5 Revised 12/2015