Finance 4395
Advanced Financial Management
Fall 1999
Andy Terry
Text: Ross, Westerfield, and Jordan, Fundamentals of Corporate Finance (note: this is the same text used in Business Finance 3310; chpt references below refer to the 4th edition) I will hand out cases in class.
Office hours: TR, 1:00 - 5:30, or by appointment; ph 569-8872
Prerequisites: Finance 3310
The purpose of this course is twofold. One is to introduce students of finance to the skill of managerial decision making - in essence to teach them how to apply financial theory and tools to real life business situations. Financial management involves i) defining the problem, ii) gathering relevant facts, iii) analyzing the facts and iv) making recommendations. Recommendations must then be convincingly communicated to others, some of whom may know nothing about finance. As an example, a financial manager may be asked to evaluate the potential acquisition of another company and present his findings to the Board of Directors. The second purpose is to expose students to more advanced finance issues or topics than were presented in Business Finance.
This course will involve a mixture of lectures and case study. A major difference from other finance courses and source of frustration to students is the apparent lack of guidance and structure. This is because real world problems seldom come with guidance or structure. The only way to learn how to analyze cases is by actually doing them.
Course Design:
A major feature of the course is group presentations of cases. There will also be a mid-term and final exam. Most group presentation cases will be preceded by either a lecture on the relevant financial theory, or by working through a related case. Students will be expected to have worked through the related cases and be prepared to discuss them in class It is essential that you actively participate in class.
More specifically:
i) each group will work through every group presentation case; one group will present the case to the class.
ii) each group will hand in a write-up of its analysis; limit it to 3 pages, double spaced, excluding numerical analysis. English composition counts!
iii) the presenting group should prepare transparencies. Numerical analysis transparencies
should be reproduced for fellow classmates
Grading:
Class participation: 10%
Group presentations 15%
Mid term exam 30%
Final exam 45%
Note: If you miss an exam you will be given a grade of 0 on that exam.
Tentative course outline Text
1. Introduction (Review of Fin. 3310) 1, 2, 5-8, 12, 13
• Time Value of Money
• Interest rates, risk and return
• Efficient markets
• Model of the corporation
• Practice case
2. Financial Statements & Ratio Analysis 3
• L.A. Gear
3. Pro-Forma Financial Statements & Cash Budgeting 4, 18
• Example Case
• Michigan Milling Co.
• Triad Campers
4. Cost of Capital, Optimal Capital Structure & L-T financing 14-16
• Debt Policy and Value (Practice Case)
• Quick Prints
• Hamaker Water Co., Inc.
Mid-Term Exam October 14
5. Capital Budgeting 9,10,11
• Delaware Pipe
• Lincoln Sports Equipment
6. Valuation
• Example Case
• Fabricare
• To Be Determined
Final Exam December 9, 10:30 - 12:30
Topics Covered
Although the course involves primarily the case method, as mentioned above there will be lecture and discussion of many more topics than are found in the cases alone. These are more advanced finance issues than those presented in the introductory finance course. A successful student in this class should come away with a good understanding of the following topics or issues:
• Basic financial tools (review)
Statement of Cash flows
Ratio Analysis
Pro Forma's
Cash Budgets
• Capital Structure and cost of capital
Theory
Practical Considerations (rating agencies, mkt. conditions, etc.)
Initial Public Offerings (IPO's)
Rights Offerings
Dilution Issues
Private v. Public companies
• Dividend Policy
• Capital Budgeting
• Valuation & Acquisitions
Theory
Practical Considerations and evidence
LBO's
Private v. Public companies
• International considerations
Students with Disabilities. It is the policy of UALR to accommodate students with disabilities, pursuant to federal and state law. Any student with a disability who needs accommodation, for example in seating placement or in arrangements for examinations, should inform the instructor at the beginning of the course. The chair of the department offering this course is also available to assist with accommodations. Students with disabilities are also encouraged to contact the Office of Disability Support Services, which is located in the Donaghey Student Center, Room 103, telephone 569-3143.
NO CELL PHONES ALLOWED IN CLASS.