Principles of Corporate Finance

Course goals

Learning objectives

• The student acquires an introductory level of understanding on finance and accounting
• The student is able to assess and complete problems on the time value of money
• The student is able to understand financial statements and assess the financial position of a real-world company based off these financial statements
• The student understands the basics of valuation of bonds and equity and is able to value these instruments themselves
• The student can work with double entry accounting on an introductory level
• The student is able to complete problems on discounted cash flow (DCF) analysis
• The student can work with formulas to calculate the value of perpetuities and annuities

Content

This course covers the basic principles of corporate finance and accounting and provides the students with a solid foundation to build on for their later progress through their degree. It guides the students to understand and explore their nature, role and applications to variety of real-life business situations, but mainly to corporate finance and corporate decision making. The course covers the study of the key financial concepts, like time value of money and arbitrage, the valuation of major securities like bonds and stocks, the financial risk and portfolio theory and the CAPM, as well as the accounting principles and reporting and the financial statements, their nature, content, use and analysis. The nature of the course is technical and quantitative and employs tutorials and use of exercises and applications to practice the introduced topics. To make the course more hands-on, we stress the importance of using Excel in solving financial problems, which reflects its wide use in business life.

Academic skills
This course focuses on the following academic skills:
 
Analytical skills

• Problem solving (identifying the problem, devising a path towards the solution, follow this path, verify the outcome).
• Identify, interpret and critically evaluate main lines of reasoning.
• Evaluate evidence in text and presentations.
• Application of MS Excel for accounting and finance assignments.

Topics

• Financial Statements
• Accounting entries and the ledger accounts
• operating cycle and income statement
• Accrual accounting and cash accounting
• From financial statements to cash flows
• Time value of money, Perpetuities and Annuities
• Investment decision rules
• Valuation of Bonds and equities
• Introduction to risk and return and the Capital asset pricing model

Format
There will be plenary lectures, tutorials and online quizzes.

Assessment method
The final course grade will be the based on two marks: 1) the Quizzes mark (15%) and 2) the Exam mark (85%). 

Final exam
The final exam is a closed-book exam which consists of approximately 40 multiple choice questions and a number of open-end questions. The final exam will cover all topics of the course. At the exam you are not allowed to bring any books or notes. Only non-programmable calculators are allowed (see the students website for permitted models). A sheet with the most important formulas will be provided.

Effort requirements
The effort requirement for this course is attendance and active participation in the tutorials. To be eligible for the retake you need to attend at least 5 out of 7 tutorials for which you’re demonstrably prepared.

Repeaters
Repeaters will have the same curriculum, responsibilities and treatment as a regular student. This includes the weekly quizzes and the need to attend the weekly tutorial sessions in order to meet the minimum effort  requirement.

Real World Perspective
The course introduces the students to the fundamental financial market concepts of time value of money, valuing financial assets and understanding financial statements. It also serves as a foundation for further study of the world of corporate finance and accounting. Furthermore, the course introduces the study of the concept of risk and return, portfolio theory and the capital asset pricing model, which are of key importance in business life and the financial markets.

Information
This course cannot be followed by students Economics and Business Economics (U.S.E.).

In case online access is required for this course and you are not in the position to buy the access code, you are advised to contact the course coordinator for an alternative solution. This will likely involve writing a substantial paper on a subject related to finance and accounting.

Please note that access codes expire and are not re-usable, meaning that codes from secondhand books do not work. Similarly, access codes from books with different ISBN do not work. Separate or spare codes are usually not available. Note that the textbook, which is used in this course (together with Connect code) will be used in the second-year finance course as well.