Corporate Finance

COURSE DESCRIPTION

This introductory course into the world of Corporate Finance helps students master the vocabulary of financial statements and accounting reports and equips them with the skills to use these tools to communicate with internal and external interlocutors. It also focuses on how to measure corporate investments and considers the different finance resources that are currently available.

The course covers several different areas:

• After introducing the basic concepts of financial accounting, students analyse and interpret financial statements using different methods to assess company trends.
• Another important skill is calculating the present and future value of money and understanding all the components of interest rates. These concepts will be essential for calculating rates of return and evaluating all the decisions in capital budgeting.

Students will be able to manage corporate working capital and forecast financial statements. From this information, they can estimate future cash flows and perform a company valuation.

PART 1: BASICS IN FINANCIAL ACCOUNTING

• Accounting Equation and Accounting Cycle
• Comprehensive Chart of Accounts
• Main Financial Statements
  • Balance Sheet
  • Income Statement
  • Statement of Owner’s Equity
  • Cash Flow Statement
• Main Differences between IFRS and US GAAP

PART 2: CASH FLOW MANAGEMENT

• Improving Cash Flow Management
• Free Cash Flow
• The High Profit/No Cash Paradox

PART 3: FINANCIAL STATEMENTS ANALYSIS

• Horizontal Analysis
• Vertical Analysis
• Ratio Analysis
  • Liquidity
  • Asset Management
  • Debt Management
  • Profitability: Margin, ROA, ROI and ROE
  • DuPont Analysis

PART 4: COST ACCOUNTING

• Direct and Indirect Costs
• Variable and Fixed Costs
• Costs Allocation
• Break-Even Point

PART 5: TIME VALUE OF MONEY

• Future Values and Present Values
• Annuities
• Perpetuities
• Uneven Cash Flows

PART 6: INTEREST RATES

• The Cost of Money
• Determinants of Market Interest
• The Term Structure of Interest Rates

PART 7: RISKS AND RATES OF RETURN

• Risk-Return Trade-Off
• Stand-Alone Risk
• Risk in a Portfolio Context (CAPM)
• Relationship between Risk and Rates of Return

PART 8: COST OF CAPITAL

• Weighted Average Cost of Capital (WACC)
• Basic Definitions
• Factors that Affect the WACC

PART 9: BASICS OF CAPITAL BUDGETING

• Net Present Value
• Internal Rate of Return
• Modified Internal Rate of Return
• Payback Period

PART 10: CASH FLOW ESTIMATION AND RISK ANALYSIS

• Conceptual Issues in Cash Flow Estimation
• Analysis of an Expansion Project
• Replacement Analysis

PART 11: WORKING CAPITAL MANAGEMENT

• Current Assets Investing and Financing Policies
• Cash Conversion Cycle
• Cash Budget
• Inventories and Accounts Receivable
• Accounts Payable and Bank Loans
• Accruals

PART 12: FINANCIAL PLANNING AND FORECASTING

• Sales Forecast
• Forecasted Financial Statements
• Analysing the Effect of Changing Ratios

PART 13: COMPANY VALUATION METHODS

• Qualitative valuation methods
• Quantitative valuation methods
  • Intrinsic valuation methods: DCF, NAV
  • Comparables valuation: Multiples