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Rationale

Learning Objectives and Outcomes

Teaching and Learning Resources

Introduction to Corporate Finance.
Accounting Statements and Cash Flow
Financial Planning and Growth. Value and Capital Budgeting
How to Value Bonds and Stocks
Some Alternative Investment Rules
Net Present Value and Capital Budgeting
Risk Analysis, Options and Capital Budgeting
Capital Market Theory: An Overview
Return & Risk: The Capital Asset Pricing Model (CAPM)
An Alternate View of Risk and Return
The Arbitrage Pricing Theory

Case Studies

Related Workshops

Learner Support

Recommended Texts

Resources

Financial Statement Analysis: An Integrated Approach
Glossary

Assignments, Assessments

Assessment Regulations

Learning Centres

Corporate Finance

Rationale

Corporate Finance is a specific area of finance dealing with the financial decisions corporations make and the tools as well as analyses used to make these decisions.

The discipline as a whole may be divided among long-term and short-term decisions and techniques with the primary goal being the enhancing of corporate value by ensuring that return on capital exceeds cost of capital, without taking excessive financial risks. Capital investment decisions comprise the long-term choices about which projects receive investment, whether to finance that investment with equity or debt, and when or whether to pay dividends to shareholders. Short-term corporate finance decisions are called working capital management and deal with balance of current assets and current liabilities by managing cash, inventories, and short-term borrowing and lending (e.g., the credit terms extended to customers).

Corporate finance is closely related to managerial finance, which is slightly broader in scope, describing the financial techniques available to all forms of business enterprise, corporate or not.

See also

Links and references

General
Valuation and Capital Budgeting
Capital Structure and Dividend Policy
Working Capital Management
Real options
Decision Tree Analysis
Financial risk management

Learning Objectives and Outcomes

This is a non-taught unit designed for self-directed study by those intending to enhance their knowledge, understanding and skills in Corporate Finance.

Knowledge

After completing the course, student will

Understand the fundamentals of Corporate Finance
Understand how the international financial markets work
Understand the Financial Statements and how to analyse them
Understand the principles of Financial Planning and Capital Budgeting
Understand the concepts of Bond and Stock valuation
Understand the Capital Market Theory and the Capital Asset Pricing Model

Skills

After completing the course, student will be able to

Conduct the Fundamental Analysis of the financial statements
Conduct Financial Analysis
Participate in the Financial Planning and Budgeting processes
Conduct Risk Analysis

Today's Videos

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Teaching and Learning Resources

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Introduction to Corporate Finance. Accounting Statements and Cash Flow

Tutorials

Readings

Financial Statement Analysis: An Integrated Approach

Fundamental Analysis of a business involves analyzing its income statement, financial statements and health, its management and competitive advantages, and its competitors and markets .

The analysis is performed on historical and present data, but with the goal to make financial projections. There are several possible objectives:

to conduct a company stock valuation and predict its probable price evolution,
to make projection on its business performance,
to evaluate its management and make internal business decisions,
to calculate its credit risk .

See also

External links
- MIT Open Course Ware
- Fundamental Analysis

Financial markets

Bond market Fixed income Corporate bond Government bond Municipal bond Bond valuation High-yield debt
Stock market Stock Preferred stock Common stock Registered share Voting share Stock exchange
Foreign exchange market Retail forex
Derivatives market Credit derivative Hybrid security Options Futures Forwards Swaps
Other Markets Commodity market OTC market Real estate market Spot market
Finance series Financial market Financial market participants Corporate finance Personal finance Public finance Banks and Banking Financial regulation

Financial Planning and Growth. Value and Capital Budgeting

Tutorials

Readings

In general usage, a Financial Plan can be a budget, a plan for spending and saving future income. This plan allocates future income to various types of expenses, such as rent or utilities, and also reserves some income for short-term and long-term savings. A financial plan can also be an investment plan, which allocates savings to various assets or projects expected to produce future income, such as a new business or product line, shares in an existing business, or real estate.

In business, a financial plan can refer to the three primary financial statements (balance sheet, income statement, and cash flow statement) created within a business plan. Financial forecast or financial plan can also refer to an annual projection of income and expenses for a company, division or department.^[1] A financial plan can also be an estimation of cash needs and a decision on how to raise the cash, such as through borrowing or issuing additional shares in a company.^[2]

While a financial plan refers to estimating future income, expenses and assets, a financing plan or finance plan usually refers to the means by which cash will be acquired to cover future expenses, for instance through earning, borrowing or using saved cash.

See also

Capital Budgeting (or investment appraisal) is the planning process used to determine a firm's long term investments such as new machinery, replacement machinery, new plants, new products, and research and development projects.

Many formal methods are used in capital budgeting, including the techniques such as

These methods use the incremental cash flows from each potential investment, or project. Techniques based on accounting earnings and accounting rules are sometimes used - though economists consider this to be improper - such as the accounting rate of return, and "return on investment." Simplified and hybrid methods are used as well, such as payback period and discounted payback period.

Net present value
Internal rate of return
Equivalent annuity method
Real options
Ranked Projects
See also
References
External links
- Studyfinance.com University of Arizona
- Valuation, Prof. Aswath Damodaran
- Finance lectures CEU Business School
- Investment Decisions and Capital Budgeting, Prof. Campbell R. Harvey

How to Value Bonds and Stocks. Some Alternative Investment Rules. Net Present Value and Capital Budgeting. Risk Analysis, Options and Capital Budgeting

Tutorials

Readings

Bond Valuation is the process of determining the fair price of a bond. As with any security or capital investment, the fair value of a bond is the present value of the stream of cash flows it is expected to generate. Hence, the price or value of a bond is determined by discounting the bond's expected cash flows to the present using the appropriate discount rate.

See also

External links
- Discussion
  - Bond Price Volatility Investment Analysts Society of South Africa
  - Duration and convexity Investment Analysts Society of South Africa
  - Course material Fixed Income Analytics

Net present value

See also

References

Risk Analysis is a technique to identify and assess factors that may jeopardize the success of a project or achieving a goal. This technique also helps define preventive measures to reduce the probability of these factors from occurring and identify countermeasures to successfully deal with these constraints when they develop to avert possible negative effects on the competitiveness of the company.

One of the more popular methods to perform a Risk Analysis in the computer field is called FRAP (Facilitated Risk Analysis Process).

Three of the most important risks a software company faces are unexpected changes in revenue and costs from those budgeted and amount of specialization of the software planned. Risks that affect revenues can be unanticipated competition, privacy, intellectual property right problems, and unit sales that are less than forecasted; unexpected development costs also create risk that can be in the form of more rework than anticipated, security holes, and privacy invasions (Messerschmitt and Szyperski, 2004).

Narrow specialization of software with a large amount of research and development expenditures can lead both business and technological risks since specialization does not lead to lower unit costs of software (Rao & Klein, 1994). Combined with the decrease in the potential customer base, specialization risk can be significant for a software firm. After probabilities of scenarios have been calculated with risk analysis, the process of risk management can be applied to help manage the risk.

Software

Monte Carlo Simulation Tool for Excel by Lumenaut
Monte Carlo Simulation Tool for Excel by Decisioneering
Monte Carlo Simulation Tool for Excel by Palisade

External links

Information Risk Analysis is GOOD!
Decision Analysis in Health Care Online course from George Mason University providing lectures, information, and tools for risk analysis

Capital Market Theory: An Overview. Return & Risk: The Capital Asset Pricing Model (CAPM). An Alternate View of Risk and Return: The Arbitrage Pricing Theory

Tutorials

Readings

Capital Asset Pricing Model

Articles

Efficient frontier generators

Recommended Texts

Corporate Finance, 9/e

Stephen A. Ross, Massachusetts Institute of Technology
Randolph W. Westerfield, University of Southern California
Jeffrey Jaffe, University of Pennsylvania

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