Overview
In general, finance can be defined as the area which deals with the markets, institutions, and instruments for transferring money among economic agents – consumers, producers (business units), and the government. Therefore, each and every individual or organization is affected by the decisions made in the financial sector. Finance is intrinsically tied to economics. The broader economic environment, both at the national and international levels, shapes the financial planning and decisions made by individuals and business units. When the economy goes into a recession, people curtail their expenditures, and the businesses write off many previously planned investment projects. Quite the opposite is expected when the economy experiences a boom.
Corporate finance is about management of cash inflows and outflows of a business firm. And, with increased globalized activities, such cash flows are not only in terms of domestic currency but also in terms of foreign currencies. The main objectives of corporate finance are maximization of corporate value and management of corporate financial risks. It deals with both short-term and long-term financial decisions made by business firms as well as with the analytical frameworks and techniques involved in such decisions.
This course is definitely useful for those who are planning a career in financial management. Most of the topics discussed are also expected to enhance understanding of the business environment for people pursuing other careers as well. Finance is, and will remain to be, an inseparable function of any business; perhaps more importantly, most business decisions of a firm are evaluated by looking at its financial conditions and outcomes. An understanding of firm’s financial management is crucial for all business managers.
Outline
This course is divided into eight ‘lessons.’
- Lesson 1: Managers, Profits, the Financial Value of a Firm, Agency Problem, Corporate Governance, and Markets
- Lesson 2: Demand, Supply, Market Equilibrium, and Marginal Analysis in Economic and Financial Decision-Making
- Lesson 3: Elasticity, Basic Estimation Techniques, and Demand Estimation and Forecasting
- Lesson 4: Basics of Risk and Uncertainty and their applications in economic and financial decision-making in the business management context. Emphasis on the no-free-lunch idea.
- Lesson 5: An introduction to financial markets and securities and their relevance to corporate financial management.
- Lesson 6: Production, Cost, and the Estimation of Production and Cost
- Lesson 7: Perfect Competition and Monopoly
- Lesson 8: Strategic Decision Making in Oligopoly Markets
Learning outcomes
By the end of this course, students should be able to:
- Explain the unique characteristics and the related issues of corporations and how their ownership changes hands through stock market transactions.
- Analyze the primary financial statements of a corporation and demonstrate their importance for stakeholders.
- Make decisions to maximize the value of the corporation with cost-benefit analysis, based on the law of one price and the concept of time value of money.
- Understand interest rates and explain the impacts of inflation, government policy, risk and taxes on interest rates.
- Explain the valuation of bonds and stocks.
- Describe the net present value, internal rate of return, and payback rules for investment decisions.
- Develop an understanding of the fundamentals of capital budgeting.
- Explain the relationship between risk and return in the context of investments.
- Make the choice of a portfolio of assets.
- Describe the capital asset pricing model and its use in calculating the expected return for a risky security and the cost of capital.
- Understand capital market efficiency/inefficiency in the context of investment behaviour.
- Determine the optimum capital structure of a corporation with and without taxes.
Evaluation
Your grade will be based on the successful completion of weekly applied problems, two group projects, a comprehensive individual assignment and on your participation in group discussions.
| Activity | Weight |
| Weekly Applied Problems | 15% |
| Weekly Discussions | 15% |
Group Project 1 - Submitted Assignment (10 marks)
- Participation, as reflected in the peer evaluation (5 marks)
| 15% |
Group Project 2 - Submitted Assignment (10 marks)
- Participation, as reflected in the peer evaluation (5 marks)
| 15% |
| Comprehensive Individual Assignment | 40% |
| Total | 100% |
To receive a passing grade in this course, you must meet these minimum standards:
- receive a minimum of 60% on the participation components; and
- receive an average grade of 60% over all course components.
Materials
Digital course materials
Links to the following course materials will be made available in the course:
Berk, J., DeMarzo, P., & Stangeland, D. (2022). Corporate Finance (5th Canadian edition). Pearson Education Canada.
Other materials
- All other course materials will be accessed online.
- Students are encouraged to obtain and be able to use a financial calculator for this course (e.g., a basic version of the Texas Instruments BA II Plus).