BA 306 – Working with Money


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BA 306 – Working with Money

  1. 1. BA 306 – Working with Money Portland State University School of Business Administration Fall Quarter, 2009 Instructor : Jim Hunter, MBA Home Phone : 503 557 1891 email : Office Hours : 12:00 – 14:00, Mon. and Wed., SBA 469(By appointment) Class Period : Monday and Wednesday Time : 10:15- 12:05 Dates: September 28 to December 2 Final Exam : Wednesday, December 9, 10:15-12:05 COURSE DESCRIPTION The course covers essential topics in accounting and finance, exclusively designed for business minors. Topics include understanding, interpreting and forecasting financial statements, especially for small businesses. Time value of money evaluation techniques will be used to determine present and future values, evaluate investment projects, value small businesses, calculate loan payments etc. Sources and costs of financing will also be introduced. A comprehensive Financial Plan covering the above must be submitted. PREREQUISITES 1. No prior coursework required 2. Open to students with Freshman, Sophomore, Junior or Senior standing. 3. This course in intended to fulfill the finance and accounting requirements for the SBA business minor. It does not fulfill requirements for SBA Majors and will not count towards business units for a Business Major. CONCEPTS AND APPLICATIONS REVIEWED IN THE COURSE By the conclusion of the course, you will be able to perform the following financial decision making analyses, following the lecture and course materials to be covered: >understand and interpret income statements, balance sheets and cash flow statements >understand cash flow versus accrual accounting concepts >calculate and interpret basic financial ratios and common size financial statements >construct projected financial statements, determining funds needed to finance growth >understand the nature of fixed versus variable costs and apply to breakeven analysis >understand time value of money calculations and applications to financial problems using a financial calculator >apply time value techniques to the assessment of proposed capital budgeting projects >understand how companies measure and use their cost of capital in financial decisions >value small businesses >introduce capital markets and sources of financing
  2. 2. REQUIRED TEXT AND MATERIALS 1. Finance and Accounting for Nonfinancial Managers, 5th edition by William Droms, Perseus Publishing 2. Chapter slides in Power Point format available 3. Chapter Questions and Problems are at my website at SBA. 4. A financial calculator is needed to do well in the class. The Texas Instruments BA II is a good one and available at the bookstore. Google TI BAII for a variety of learning materials. GRADING PROCEDURE 1. Homework (Recorded, but not graded) 10% (all or nothing) 2. Mid term exam 40% 3. Financial Plan 50% 1. You are guaranteed at least the following grade if your weighted average course score falls within the following percentiles: A 93 – 100 A- 90 – 93 B+ 87 – 90 B 83 – 87 B- 80 – 83 C+ 77 – 80 C 73 – 77 C- 70 – 73 D+ 67 – 70 D 60 – 67 F below 60 Additionally a curve may be applied to these scores. Class participation is encouraged and will be used in the final grade evaluation in border-line cases. 2. NO MAKE UP EXAMS WILL BE GIVEN, NO EXCUSES ACCEPTED. The course outline lists tentative dates for the exams. You are responsible to take the exam whenever it is given, even if the tentative date changes. 3. Chapter questions and problems will be reviewed in class on the next class date following the chapter lecture. COURSE POLICIES 1. Personal digital assistants or any other type of mini-computer are NOT allowed for exams. Financial calculators ARE allowed. 2. During class lectures, please turn off all cell phones and pagers. 3. Failing to demonstrate honesty and integrity will result in a grade of ZERO for that exam. 4. Students are held responsible for all announcements made in class.
  3. 3. COURSE OUTLINE (Subject to change) September 28 Course Overview, Business Forms and Taxes (Chapters 1 and 2) September 30 Financial Statements (Chapters 3~5) October 5 Financial Statements continued October 7 Financial Statement Analysis (Chapter 6) October 12 Financial Forecasting and Cash Budgeting (Chapter 7) October 14 Financial Forecasting continued October 19 Breakeven Analysis for Profit Planning (Chapter 8) October 21 Time Value of Money (Chapter 11) October 26 Time Value of Money continued October 28 Mid Term Preparation November 2 Mid Term Exam November 4 Mid Term review, Working Capital Policy (Chapter 9) November 9 Working Capital Management (Chapter 10) November 16 Capital Budgeting (Chapter 12) November 18 Capital Budgeting continued November 23 Cost of Capital (Chapter 13) November 25 Common Stock Valuation (Chapter 15) November 30 Valuing Small Businesses (Chapter 16) December 2 Long Term Financing (Chapter 14) and Bond Valuation (Chapter 15)
  4. 4. FINANCIAL PLAN Narrative Portion (approximately 5 pages double-spaced). Each of the topics below will be identified or addresses as a separate section or paragraph. Students can do the plan individually or in groups of up to three. 1. Business Concept – a description of the business opportunity being considered 2. Competitive Advantage – why you will make this happen, why you will succeed, what you can offer that others do not. 3. Competitive Analysis – who is the competition, what are their strengths and weaknesses. 4. Business Risk Analysis – what could go wrong, what are the downsides. 5. Initial capital required – how much and where from. 6. Pro Forma Financial Statement Analysis – discussing the projections from the financial statement exhibits. 7. Financial Ratio Analysis – identify at least two ratios that will be important to manage in order for this business to succeed. 8. Break even analysis – discuss the break even quantity or break even sales required on a monthly or annual basis. 9. Accounts Receivable policy – will you extend credit, if so, on what terms? 10. Inventory Policy – will you have inventory, how will it be managed? 11. Cost of Capital – estimate the cost of capital for this business.* 12. Capital Budgeting – identify one capital budgeting project and discuss the results of the calculations. * 13. Valuation – what will the business be worth at the end of three years (2012) assuming you wanted to sell it? * * The Financial Plan will be receive an F if this section is not included.
  5. 5. EXHIBITS 1. Balance Sheets for January 1, 2009 (basically starting up) and then for Dec 31 for 2010, 2011, 2012. 2. Income statements for the years 2010, 2011 and 2012 3. Calculations for estimating the cost of capital for the business. 4. Example of capital budgeting 5. Break even calculations. 6. Estimated Value for the business at the end of 2012.