STATE UNIVERSITY OF NEW YORK

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STATE UNIVERSITY OF NEW YORK

  1. 1. 1STATE UNIVERSITY OF NEW YORK COLLEGE OF TECHNOLOGY CANTON, NEW YORK COURSE OUTLINE FSMA 210 – INTRODUCTION TO FINANCE Prepared By: Dr. Chengru Hu SCHOOL OF BUSINESS AND PUBLIC SERVICE BUSINESS DEPARTMENT FALL 2006 1
  2. 2. FSMA 210 – INTRODUCTION TO FINANCE A. TITLE: Introduction to Finance B. COURSE NUMBER: FSMA 210 SHORT TITLE: Intro Finance C. CREDIT HOURS: 3 credits D. WRITING INTENSIVE COURSE: NA E. COURSE LENGTH: 15 weeks F. SEMESTER(S) OFFERED: Fall and Spring G. HOURS OF LECTURE, LABORATORY, RECITATION, TUTORIAL, ACTIVITY: 3 lecture hours per week H. CATALOGUE DESCRIPTION: This introductory course covers fundamental elements of business finance. Discussions will include the concepts of financial analysis, time value of money, security valuations, risk and return, capital budgeting, and other issues in corporate decision- making. I. PRE-REQUISITES/CO-COURSES: CITA 110 and GER Math or ACCT 101 J. STUDENT LEARNING OUTCOMES: Upon completion of this course, students will be able to do the following: 1. Identify the job functions of financial managers 2. State the ethical consideration of financial managers 3. Compute common financial ratios and utilize these ratios to evaluate the performance of a corporation 4. Calculate time value of money 5. Apply fundamental concepts in the analysis of common financial instruments such as loans, corporate bonds and common stocks. 6. Describe concepts of risk, and risk-return tradeoff. 7. Solve basic capital budgeting problems. 8. Describe key issues in corporate financial decision-making. K. TEXT: Fundamentals of Financial Management, 11th edition, by Brigham and Houston, Thomson South-Western, 2004 L. REFERENCES: 1. Essentials of Corporate Finance, 4th edition (ISBN 0-07-251076-5), by Ross, Westerfield and Jordan, McGraw Hill Higher Education, 2004 2. Excel Applications for Corporate Finance, 1st edition (ISBN 0-07-298072-9), by Troy Adair, McGraw Hill Higher Education, 2005 2
  3. 3. M. EQUIPMENT: Computer classroom, access to company financial statements, Wall Street Journal, and computer internet access. N. GRADING METHOD: Standard A-F grading O. MEASUREMENT CRITERIA: Quizzes, hourly exams, class participation, and final exam P. DETAILED OUTLINE: See attached sheet. 3
  4. 4. DETAILED OUTLINE FSMA 210 – INTRODUCTION TO FINANCE TOPICS Part I: Introduction to Financial Management 1. An Overview of Financial Management A. Career opportunities in finance B. Alternative forms of business organizations C. Responsibilities of the financial managers D. Goal of the corporation E. Agency relationship 2. Financial Statements, Cash Flow, and Taxes A. Financial statements and reports o The balance sheet o The income statement o Statement of cash flow o Statement of retained earnings B. Net cash flow C. Modify accounting data for managerial decisions D. Market Value Added (MVA) and Economic Value Added (EVA) E. The federal income taxation system 3. Analysis of Financial Statements A. Ratio analysis o Liquidity ratios o Asset management ratios o Financial leverage ratios o Profitability ratios o Market value ratios B. Comparative ratios and “benchmarking” C. Trend analysis D. The Du Pont equation E. Uses and limitation of ratio analysis 4
  5. 5. 4. The Financial Environment: Markets, Institutions, and Interest Rates A. Introduction to financial markets B. Introduction to financial institutions C. The stock market o Physical location market o OTC market D. The cost of money E. Determinants of market interest rate F. The term structure of interest rates G. Factors influence the level of interest rate and the shape of yield curve H. Interest rate and business decisions Part II: Fundamental Concepts in Finance 5. Risk and Rates of Return A. Expected rate of return B. Risk o Stand-alone risk o Risk in a portfolio context C. Risk aversion and required returns D. Diversification o Diversifiable risk versus market risk o Beta coefficient E. Capital Asset Pricing Model (CAPM) and Security Market Line (SML) F. Factors that influence the shape of SML G. Physical assets versus securities 6. Time Value of Money A. Time line B. Future value (FV) and compounding o FV of a single cash flow o FV of an annuity o FV of uneven cash flows C. Present value (PV) and discounting o PV of a single cash flow o PV of an annuity o PV of perpetuities o PV of uneven cash flows D. Interest rates o Nominal, or quoted, or APR rate o Periodic rate o Effective, or equivalent, annual rate (EAR) E. Amortized loans 5
  6. 6. Part III: Asset Valuations 7. Bonds and Their Valuation A. Common key characteristics of bonds B. Bond valuation C. Bond yield D. Bond risk o Interest rate risk o Reinvestment rate risk o Default risk. E. Corporate bond o Types of corporate bonds o Bond rating F. Bond markets 8. Stocks and Their Valuation A. Legal rights with stock ownership B. Stock valuation o Constant growth stock 1. Dividend and earnings growth 2. Expected rate of return o Non-constant growth stock o Corporate valuation C. Common stock market D. Stock market equilibrium o The efficient market hypothesis 1. weak-form efficiency 2. Semistrong-form efficiency 3. Strong-form efficiency o Implication of market efficiency E. Preferred stock valuation Part IV: Advanced Financial Management Topics 9. The basic of capital budgeting A. Capital expenditure motives B. Capital budgeting decision rules o Payback period o Net present value (NPV) o Internal rate of return (IRR) C. Comparing capital budgeting methods D. Making capital budgeting decisions o NPV profiles o Independent projects o Mutually exclusive projects 10. Other advanced Financial Management topics A. Cost of capital 1. Costs associated with debts and equity 2. Weighted average cost of capital (WACC) o Cash Flow and Risk Analysis 6
  7. 7. B. Capital structures and leverage C. Corporate dividend policy D. Short-term financial planning o Current asset management o Current asset financing 7

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