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Course Description
This course presents the fundamental concepts used in finance, emphasizing
basic financial literacy and the tasks associated with making responsible
financial management decisions. In addition to addressing sources and
uses of capital and the functions of financial markets, this course also
covers the principles of time value of money, risk and return, fundamental
aspects of investments including security and real asset valuation, and
the use of financial accounting information.
Learning Objectives
After completing this course, students will be able to:
• Describe finance in general and, specifically, the role of financial
management in corporations and other enterprises
• Identify the purpose and functions of financial markets and institutions
• Use financial accounting information in assessing the basic financial
health of a firm
• Apply time value of money principles to the valuation of financial
and real assets
• Explain why and how to adjust for risk in making investment and
financing decisions
Breadth of Assignments
This course uses a variety of methods to explore the Principles of Finance
including: textbook reading assignments, online Flash-based presentations,
Internet research and case studies, self-assessment quizzes, collaborative
projects involving problem-solving or discussions with classmates, individual
activities including e-lectures, writing assignments, journal entry assignments,
and optional essays.
Required Resources
Brigham, E.F. and Houston, J. F. (2004). Fundamentals of Financial Management
(Concise 4th ed.). Mason OH: South-Western College Publishers, ISBN 0-0324-25872
-0.
Course Summary
Principles of Finance
Business & Management
Module/Topics
Module 1: Overview of the Financial Infrastructure
• The three major areas of finance
• Advantages and disadvantages of the forms of business organization
• Goals of stockholders and the principle of wealth maximization
• The basic purpose and functioning of financial markets and institutions
• Distinguishing between broad types of financial markets and securities
• Stock trading venues and mutual funds
• The basic functions of money and capital markets and the forces
that affect market interest rates
• Yield curves
• Different types of risk and their impacts on interest rates
Module 2: Accounting Concepts and Financial Statement Analysis
• Itemizing the information in the income statement, balance sheet,
and statement of cash flows
• The differences between accounting income and cash flow and between
book value and market value
• The nature of business enterprise as reflected by the balance
sheet
• Defining financial (ratio) analysis and explaining its objectives
and limitations
• Identifying the various categories of financial ratios
• Defining and calculating the ratios within each category
Module 3: Time Value of Money Principles
• Distinguishing between points in time and periods of time as shown
by a time line
• Defining compounding and discounting
• Computing future value or present value for single payment amounts
• Distinguishing between single payments and streams of payments
and between uneven streams and annuities
• Solving for the interest rate or time period for simple present
value and future value problems
Module 4: Risk and Return
• Defining risk
• How risk influences investment decisions
• Calculating risk and rates of return
• How diversification can limit risk
• How diversifiable risk can be lowered using a portfolio approach
Module 5: Security Valuation
• The basic functions of bonds
• How bond prices behave over time and how bond prices vary with
prevailing interest rate levels
• Computing market prices for bonds
• Determining the yield to maturity on a bond
• Differentiating between the various types of equity securities
(stocks)
• Identifying the rights and expectations of common stockholders
• The nature of various stock market transactions
• Computing stock values based on expected future cash flow
Module 6: Valuing Real Assets
• The role of capital budgeting in creating value for a firm
• Identifying various categories of capital budgeting projects
• Comparing the capital budgeting process with the security valuation
process
• Using investment selection criteria (for example, NPV and IRR)
to evaluate capital assets and projects
• Identifying three distinct categories of cash flows associated
with capital budgeting projects
• How cash flows are impacted by replacement and expansion projects
• Estimating incremental after-tax cash flows for a proposed capital
project
• Using discounted cash flow techniques to assess project desirability |
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