University of Bridgeport FIN 505 Finance MBA Program Notes and Syllabus for FIN 505 Finance (MBA Core)
This outline assures topic and subject content coverage. Each instructor will adapt the presentation of material as he sees fit. This can be based on class composition, student abilities and interests, events occurring in the industry, and other variables. The time spent on any topic is also at the discretion and judgment of the instructor. Likewise, an instructor will develop a useful bibliography. Discussion questions proposed in this outline can be added to, changed, or eliminated as the instructor sees fit. These questions double as learning objectives on each topic.
FIN 505 - The Core MBA Finance Course
Course Purpose This graduate finance course surveys the major sectors of the industry: corporate finance, capital markets, investments, and international aspects of each of these. A common theme is the interplay among participants in each business line and how Wall Street is the center of the money world. The student learns through case studies, lectures, discussions, and group work how to create and apply solutions to problems currently in the news.
This core finance course is a good lead off course for business and finance majors and is an introduction to the industry. Students learn what the field is all about. Additional, sequential finance courses provide a full measure of those topics presented in this survey course.
Text & other materials 1. Introduction to Finance by Melicher and Norton, 14th ed., John Wiley & Sons 2. The Wall Street Journal 3. Resources for ‘executive-level’ understanding of our topics (see Bibliography) 4. Handouts
Grades Participation, identifying course topics in the news, application on quizzes and in discussions (group work) 25%
Three exams 45%
Two case write-ups and discussion 30% (can be administered as group projects)
Bibliography The Wall Street Journal, The Economist, Investor’s Business Daily, The Financial Times, Business Week, Investopedia.com, MarketWatch.com, futures and options websites, reports from banks, brokerages, governments, associations, exchanges, …
1 University of Bridgeport FIN 505 Finance MBA Program Course Outline
Overview and review financial environment Ch 1, 5, 11, familiarity with the bibliography the firm – the corporation markets accounting in finance Ch 13, 14, relevant definitions from investopedia financial statements trends time value of money & i-rates Ch 8, 9 investopedia time lines & yield curves PV, FV et al risk vs. return Ch 12
Corporate finance cost of capital Ch 18 capital structure Ch 18 capital budgeting Ch 17 working capital Ch 15, 16
Capital markets new issues, exchanges Ch 10, 11, bibliography equities “ debt “ banks and lending Ch 2, 3, 4, bibliography FDI & trade Ch 6
Investments & securities analysis investment vehicles common stocks Ch 10 bonds & rates Ch 10, relevant cmegroup.com material commodities & futures cmegroup.com material, investopedia options 888options.com material mutual funds investopedia, www.morningstar.com markets, trading, & brokerage Ch 11, bibliography analysis Ch 10, 11, investopedia
International considerations why co.s go int’l bibliography, handouts exchange rates international economies FX markets & risk FDI Ch 6, bibliography
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Case and problem write-up assignments Select an article from The Wall Street Journal or other source in the bibliography on an issue that has been discussed in class
Identify the topic of the course to which the story relates
Identify the problem or issue in the news story
Using class or other resource information, create two or three solutions to improve the situation
Propose your best solution with your reasoning
Class participation and news on class topics (for grades) are simply shorter versions of case write-ups from the daily reading of the financial press.
Discussion and concept questions by topic
Overview and review
1. What is the current financial environment? How have brokers, traders, investment bankers, and corporations adapted to current financial conditions?
2. Describe and define the major USA financial markets. Which are currently the most active? Consider several measures: volume, participants, liquidity, … Identify the major players in those markets.
Accounting in finance
1. Why are accounting and financial statements so emphasized in finance? What is the purpose of this part of the financial industry?
2. Compare a couple of industries’ income statements and balance sheets. Point out some differences in the liabilities of a bank and a mining firm, for example. In which industries do inventory and inventory management matter more? Discuss capital intensive versus labor intensive industries. Where does intellectual capital play its part?
3 University of Bridgeport FIN 505 Finance MBA Program 3. Explain the value of the DuPont equation and its summary ratio analysis.
4. What does the quality of a set of financial statements mean to you?
Time value of money & interest rates
1. What does the yield curve depict? What are the major factors affecting the yield curve?
2. Who are the major players at various maturities on the curve? Illustrate several different issuers of securities on a yield curve.
3. How is the timeline similar to the yield curve?
4. What makes Present Value equal to Future Value in a financial sense? Link this concept to a yield curve’s price of money at any maturity.
5. Define an annuity and demonstrate how a timeline illustrates an annuity’s Present Value.
Risk vs return
1. Describe single asset and portfolio risks using standard deviation.
2. Can risk be lessened with more efficient capital markets?
Corporate finance
Cost of Capital
1. Does each firm have the same cost of capital? Why or why not? What does a company’s credit rating have to do with this?
2. List the components to a firm’s Weighted Average Cost of Capital. How does the current financial environment affect the cost of a firm’s capital? How does management’s attitude toward risk affect this cost? Is there a tax effect?
Capital structure
1. Define business risk and financial risk. How does a firm control each of these? What part does the financial environment play in creating or helping a firm manage these?
Capital budgeting
1. As a firm searches for investments to increase its value, of what use are each of these methods of project selection: Net Present Value, Internal Rate of Return, the Payback Period?
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2. Why is an accurate record of cash flows, both in and out of the corporate treasury, such a vital piece of information for the capital budgeting process? Would an investment banker’s viewpoint be the same about this as the corporation’s? What value can an investor gain from this information?
Working capital
1. In a way, current asset investment and financing are similar to a bank’s management of its loan/deposit ratio. Describe the differences between an aggressive and a conservative financing policy for current assets. Since this topic brings us back again to financial statements, discuss the cash conversion cycle for payables, receivables, and inventories. Use liquidity ratios to focus your discussion.
Capital markets
New issues and exchanges
1. What are some factors that affect a company’s decision to go public? Go back to the current financial environment and apply it to this decision. Incorporate the yield curve, time value of money, other costs, and a firm’s attitude toward risk.
2. Which industries are now the big issuers of debt and which are the big issuers of equity? Why is this so?
3. Where – on which exchanges – are these new issues being offered? What recent innovations in trading and brokerage have influenced new issues and their cost? Address foreign issuers and overseas exchanges to complete this answer.
Investments & securities analysis
Equities
1. Which are the largest stock markets in the world? Relate ownership with these large market centers and the effects of available information, taxes, and the regulatory environment. Does politics matter to the stock market?
2. From where does a company’s intrinsic value come? How do the financial statements contribute to learning this value?
3. Compare the two ways a stock can provide returns to an investor – dividends and price appreciation. How do dividends affect a stock’s price? Discuss signaling.
4. Compare the Corporate Valuation Model with the Discounted Dividend Model. Here, too, discuss why financial statements provide a sound basis for stock valuation.
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Bonds
1. Define the key characteristics of bonds.
2. Explain the kinds of risks (premiums) bonds have and how they are rated. Who rates them?
3. Describe the yield to maturity and the current yield. What is the use of each of these?
4. Show the present value of a long-term bond by the use of a timeline.
Mutual funds
1. Explain why someone would invest through a mutual fund rather than directly buying a particular stock or bond.
2. How can a mutual fund’s performance, objective, or risk be known?
Commodities, options, other derivatives
1. Explain how one financial instrument can derive its value from a different or related instrument or market.
2. Explain why volume and the existing number of outstanding contracts of derivatives are useful indications for traders of these markets.
3. Describe the uses and methods of both fundamental and technical analysis. Why can both methods be used in any market with successful results?
International considerations
1. There is an entire course on international corporate finance, but what is the major difference in raising capital from abroad or investing in projects abroad?
2. How does the corporation find information on foreign currencies, foreign economies, foreign investments, and how does it begin to manage the opportunities and risks in these areas?
3. What would be the major attractions of investing in foreign countries? Why invest somewhere that may be so different and offer so many new risks?
This document created by Prof. Dr. Edward M. Jankovic 15 July 2014
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