BUS 558: FINANCIAL MANAGEMENT
Fall II 2006
John Niedenberger, CFA
Office: 412 471-4191 x8903
FAX: 412 471-2993
Course ID BUS 558
Course Name Financial Management
Day and Dates of Course: Thursdays or Saturdays November 2 to December 18, 2006
Class Site: Southpointe
Required Text(s):Brigham and Ehrhardt, Financial Management, 11th edition,
Facilitator: John Niedenberger
Facilitator Attendance Policy: If an absence is unavoidable, please contact facilitator to a makeup an
discuss a makeup assignment in lieu of missed class participation.
Policy For Make-up work and Late Assignments: Due by last class
Extra Credit Assignments: Not applicable
(Graduate Courses do not offer a passing grade below a C or C-):
92 – 100 A
90 - 91 A-
88 – 89 B+
82 – 87 B
80 – 81 B-
78 – 79 C+
72 – 77 C
70 – 71 C-
Additional Information and/or Directions
While there are no formal prerequisites for this course, it is assumed that the student has
some basic knowledge of accounting principles, elementary algebra, and descriptive
statistics. I will distribute a basic math and statistics handout in the first class for review.
Throughout the course certain terminology or concepts are central to understanding
finance. As a backup to the text and the coverage during class time, I recommend the
website www.investopedia.com as a reference tool. It allows you to search for financial
and investment buzzwords, giving you a practitioner interpretation of many academic
terms and concepts. Especially noteworthy are the tutorials on topics such as basic
financial concepts, fundamental analysis, discounted cash flow analysis, and financial
Accessing Class Articles on E-Reserve
Go to www.waynesburg.edu and in the top corner of the homepage you will see “I
Connect.” Select that box and prepare to log-on. You log on by using your college user
name and password. Call the help desk at (724) 852-3413 to apply for this information.
Being assigned a user name and password will require a 24 to 48 hour turn around time.
The office is open Monday – Friday from 8:00 am – 4:30 pm.
Once you have logged in click on the WC Folder tab across the upper part of the screen.
A window will open and you should single click on the S drive link. Look for the “e-
learn” folder, and double click on that. Then double click on the “E-Reserve” folder.
Double click on our class readings in that folder. Print the items, as you like.
Assignments and Activities
Assignment Prior to Start of First Class: Read Chapters 1 and 2
Course Objective: This course will apply the tools of financial management to
maximize the value of the firm, that is, shareholder wealth. The financial manager is
primarily interested in the investment decision, the financing decision, the dividend
decision, and working capital management. Specific topics relating to these four broad
areas include financial statement analysis, risk analysis, valuation of securities, discounted
cash flow analysis, cost of capital, long-term financing, and derivative securities.
Method of Instruction: Combination of case studies highlighting the main concepts and
lecture/discussion format to outline the fundamental principles and analytical techniques.
The emphasis is on applying theory to real-world examples. All assigned problems or
cases focus on finding solutions to a particular decision a firm must make to optimize its
financial structure. A few brief outside articles (approximately one per workshop) will be
distributed to highlight a concept as it applies to an actual company, and to provide a
springboard to class discussion.
Case Study 15% (Due Class 3)
Mid-term 25% (Class 5 – in-class)
Company Presentation 25% (Due Class 7)
Final Exam 25% (Class 8 – in-class)
Class Participation 10%
Workshop 1: Overview and Time Value of Money
Read the following chapters prior to the first workshop:
Chapter 1: An Overview of Financial Management
Chapter 2: Time Value of Money
This workshop emphasizes the two cornerstones of finance: risk management and the time
value of money, both of which are “mega-concepts” that will be repeated throughout the
course. Chapter 2 is a hands-on guide to the many uses of present value and future value
in personal and corporate finance.
Workshop 2: Financial Statements and Analysis
Chapter 3: Financial Statements, Cash Flow and Taxes
Chapter 13: Analysis of Financial Statements
Read E-Reserve articles for class discussion: “Cash Flows, Ratio Analysis and the W.T.
Grant Bankruptcy” and “Using ROE to Analyze Stocks”
Financial statement analysis and ratios constructed from the statements form the core of
company analysis from the viewpoint of a creditor or investor. We will spend considerable
time in looking at several actual companies to apply the analysis in identifying strengths
and weaknesses. This topic will likely continue into Workshop 3.
Workshop 3: Risk and Return
Chapter 4: Risk and Return: The Basics
Chapter 5: Risk and Return: Portfolio Theory and Asset Pricing Model
E-Reserve article: “Is It Time for REITs?”
Case Study due
The purpose of this workshop is to understand the sophisticated concept of risk in the
portfolio context rather than risk of an individual security. We will develop and criticize
the use of beta as a risk measure and apply to several stocks in class. The text is rather
technical on this topic; you may want to refer to www.investopedia.com to look up some
of the terms and concepts.
Workshop 4: Security Valuation
Chapter 6: Bonds and Their Valuation
Chapter 7: Stocks and Their Valuation
E-Reserve Article: “Champions of Long-Term Investing”
We will apply the tools developed in Workshops 1 – 3 as the basis for determining the fair
value of bonds and stocks. Bond valuation is a fairly straightforward application of
present value analysis, whereas stock valuation is more complex due to the difficulty of
projecting future earnings and dividend increases. We will look at several ways of
determining the value of a stock, from the most theoretical to some practical methods used
by analysts on Wall Street.
Workshop 5: The Cost of Capital and Capital Budgeting
Chapter 9: The Cost of Capital
Chapter 10: The Basics of Capital Budgeting
Midterm Exam (in-class) for Workshops 1-4
One of the key concepts of corporate finance is that a company needs to earn a return on
investors’ money in excess of the actual opportunity cost of that money in order to add to
shareholder value. This is the concept of economic value added, as described in the text.
Capital budgeting is a decision process to choose the projects that should best enhance
shareholder wealth, i.e., the ranking of projects with the highest expected return relative to
the cost of debt and equity financing.
Workshop 6: Strategic Financing Decisions
Chapter 16: Capital Structure Decisions
Chapter 18: Distributions to Shareholders: Dividends and Repurchases
E-Reserve Article: “The Importance of Dividends in a Low-Return Environment”
How does the firm decide the proportion of debt and equity financing to maximize
shareholder wealth? The readings examine this question as well as the important related
concepts of operating and financial leverage. The issue of whether to pay a dividend and
the level of dividend also relate to return on invested capital and to cash flow analysis.
Workshop 7: Working Capital Management and Special Topics
Chapter 22: Working Capital Management
Chapter 25: Mergers, LBOs, Divestitures and Holding Companies
Company Presentation Due
A brief look at some special topics in finance: the first an extension of financial statement
analysis, and the second a special case of capital budgeting and enhancement of
Workshop 8: Derivatives Securities
Chapter 8: Financial Options and Their Valuation, pp. 284-95
Final Test on material covered in Workshops 5 – 7
No course in finance would be complete without considering the risk modification tools
of call and put options. Some basic examples and practical applications will be discussed.