Financial Management

Course goals

Upon completion of the course, students are able to:

• Articulate the role of the finance function in organizations, and derive financial data – for example through accrual versus cash flow accounting, annual reports, and ratio analysis – with implications for managerial decision making.
• Evaluate how budgets may fluctuate after organizational change, applying techniques such as cost-volume-profit analysis, absorption costing, budget variance, and time value of money.
• Appreciate financing decisions related to equity and debt, by analyzing bond valuation and stock valuation, capital budgeting decision rules, risk and return trade-off, capital asset pricing model (CAPM), and weighted average cost of capital (WACC).

Content

Content
This course discusses various aspects related to the accounting, investment and financing decisions faces by organizations, spread over three parts. First, basic concepts of financial accounting, the annual reports and the associated financial statements are discussed. In this section, questions such as how a company can show positive profits when maintaining a negative cash balance can be understood. Likewise, what having a low liquidity ratio and a long cash conversion cycle can imply. Second, cost behavior and cost allocation, and the concept of budget variance are introduced. These concepts show how budgets can vary from actual spending either because of a change in the company’s level of efficiency or because of a change in their cost structures. Third, investment and financing decisions are investigated. New projects also require additional funding. Firms are generally financed by both equity and debt. Several methods will be discussed in the course. In this section, questions such as the following will be answered: Suppose a firm can choose between several potential projects to invest in, how should the firm decide which project to pursue? What determines the value of a firm’s stocks and bonds, or in other words, for which value can the firm issue new instruments to increase funding?

Format of work
Lectures, tutorials, work groups, presentations

Materials
Various reading materials

Tests (assessment)
30% assignments / 70% exam