Financial Management and Analysis D, 10 points/15 ECTS Syllabus : Financial Management and Analysis D Course code : FEKD35 Responsibility : Umeå School of Business Subject : Business Administration Level : D (Specialized) Course credit : 15 ECTS / 10 points Field of education: Social Sciences This is a course at the D-level in a Msc-degree at Umeå University. The course can also be included in study programmes in Business Administration and Economics at Umeå School of Business. 1. Resolution to offer the course The course was established by the Faculty of Social Sciences at Umeå University in December 2002 and the syllabus was confirmed by the Board of Umeå school of Business on May 29, 2006. The syllabus is valid from August 28, 2006. 2. Objective and contents The Financial Management and Analysis course is intended for students who want to specialize in accounting and finance or finance functions in firms operating in varied and changing environments. Courses are designed to provide cutting-edge knowledge for the controller and finance functions in an integrated manner. The course also provides the basis for a student’s future professional career in the global market. Module 1. Corporate finance (5 points/7,5 ECTS) a. Contents Our primary intent, in offering this subject, is to provide an integrated overview of the most important concepts in corporate finance from the point of view of the manager of a non-financial corporation. The subject extends the student’s experience in applying standard techniques in corporate finance. It also serves as the foundation for the package of subjects that the student will select within the Accounting and Finance programme. Topics to be covered in this module include methods of valuing assets and opportunities as well as the rationale for using particular techniques. Financial management issues such as capital budgeting, capital structure and the choice between long and short term financing are also discussed. Derivatives and their role in the reduction of corporate risk are introduced. Additionally, corporate policy issues and theoretical perspectives for resolving them are presented. b. Expected learning outcomes Upon completion of this subject students should have sufficient knowledge to do all the following: • Describe the inter-relationship between financing, investment and distribution decisions. • Select and defend the use of appropriate models for valuing assets and opportunities. • Explain how theoretical concepts, such as market efficiency, affect financial decisions and strategies. • Outline the main components of current issues, such as corporate control and governance, which confront corporations today. c. Required knowledge General: • Courses in Business Administration (90 ECTS) • A minimum of 40 points/60 ECTS from A-level and B-level courses (Management, Accounting, Financial Investments, Cost Accounting, Marketing) • At the advanced, C level, a minimum of 20 points/30 ECTS, including a Bachelor’s thesis or equivalent • Furthermore, 10 points/15 ECTS Statistics or similar and a C-level course in Accounting (10 points/15 ECTS) are recommended Module specific: It is expected that the student is able to provide evidence of knowledge equivalent to a basic course in general finance as well as one in corporate finance. It is also expected that they have a minimum proficiency in basic statistics. d. Focus of instruction This subject will be presented using large group lectures as well as smaller group discussions, tutorials and workshops. e. Examination modes Students will be required to undertake a communication project attending and compulsory participation in a student presentation on issues that have divided theoreticians in the discipline. This is worth 30% of their assessment. Students will be required to undertake a final examination in the module. The final examination will be comprised of both calculations and discussion questions but no multiple choice. The examination will be worth 70% of their assessment. f. Course literature See below 7. Module 2. Advanced financial statement analysis and valuation (5 points/7,5 ECTS) a. Contents This course should be of interest to students who are contemplating careers in accounting, auditing, corporate finance, investment banking, security analysis, equity research, and financial consulting. It should also be of great interest and benefit to anyone considering the purchase or sale of a business. It deals with the analysis of financial statement information and the use of this information in making performance evaluations and investment decisions. It integrates accounting, finance, economic theory, and empirical research into a financial statement analysis and valuation framework. The primary purpose of the course is to provide the student with knowledge about equity (stock) valuation, with some attention given to credit analysis and the valuation of debt. The course is intended to provide practical valuation tools for valuing a company and its securities. The course will also provide students with advanced skills in financial modeling. Excel will be utilized as a tool for understanding and practicing financial statement analysis and valuation, including the creation of forecasted income statements and balance sheets (proformas) as a basis for valuation. A brief summary of topics includes: models of shareholder value and a comparison of accounting approaches and discounted cash flow approaches to valuation; the analysis of the firm’s profitability, growth, and value generation as a means of testing the quality of financial reports; the forecasting of earnings and cash flows; the construction of proforma analyses for strategy, planning, and valuation; analysis of risk; and the determination of price/earnings and market-to-book ratios. b. Expected learning outcomes After completing this course, the student should be able to: Subject-specific skills • Estimate "intrinsic value" with various valuation models. • Apply financial statements in the process of determining intrinsic values. • Understand the role of "bottom line" earnings (net income), book value, cash flows and dividends in valuation. • Understand the relevance of cash flow information and accruals in performance evaluation and equity valuation. • Deal with the different accounting methods used in financial statements? • Evaluate accounting quality • Determine the relevant firm attributes that determine firm value. • Apply traditional ratio analysis to evaluate firm performance and value. • Analyze factors that determines a firm's P/E ratio and market-to-book (P/B) ratio? • Evaluate risk, for equity and for debt. Core-academic skills • Develop and apply valuation approaches. • Mathematically derive various valuation models Personal and key skills • Demonstrate problem solving and analytical skills. • Demonstrate skills of critical review, discussion and evaluation. • Demonstrate the skills to locate, select, obtain and utilize information from library resources, computer databases and the internet. • Demonstrate oral, written and presentation skills. c. Required knowledge • Courses in Business Administration (90 ECTS) • A minimum of 40 points/60 ECTS from A-level and B-level courses (Management, Accounting, Financial Investments, Cost Accounting, Marketing) • At the advanced, C level, a minimum of 20 points/30 ECTS, including a Bachelor’s thesis or equivalent • Furthermore, 10 points/15 ECTS Statistics or similar and a C-level course in Accounting (10 points/15 ECTS) are recommended d. Focus of instruction The course is taught from the perspective of an equity analyst, but much of the course material will be relevant to the internal corporate financial analyst for evaluating acquisitions, restructurings, and other investments, and for calculating the value generated by strategy scenarios. It takes the form of lectures, discussions, exercises, tutorials, cases, and sometimes guest lectures by invited professionals. Students must be prepared to do a significant amount of work outside the classroom in order to fulfill course requirements. Students are expected to prepare for tutorials (for which assignments might involve reviewing selected articles and solving numerical problems) and be prepared to enter into tutorial discussion. All material is potentially examinable, irrespective of the mode of tuition. Students are expected to keep themselves apprised of information upon the module via the course web page. e. Examination modes Assignments There will be one piece of course-work (case assignment). It is not compulsory but will count for 15% of the grade. The case assignment must be finished during the course. Assessment Four hours of written examination, 85% of the final grade and one piece of course-work (15%). See the case instructions for further information about the assignment. Late submission is not accepted except when late submission permission is obtained from the module coordinator due to exceptional circumstances. f. Course literature See below 7. 3. Prerequisites Courses in Business Administration (90 ECTS) A minimum of 40 points/60 ECTS from A-level and B-level courses (Management, Accounting, Financial Investments, Cost Accounting, Marketing) At the advanced, C level, a minimum of 20 points/30 ECTS, including a Bachelor’s thesis or equivalent Furthermore, 10 points/15 ECTS Statistics or similar and a C-level course in Accounting (10 points/15 ECTS) are recommended 4. Teaching methods Described for each module above 5. Examination Examination of Modules 1-2 will be based upon the student’s active participation in seminars, a written comprehensive examination (tentamen), and successful completion of group or individual coursework as assigned. The following grading system will be used: Pass with distinction (Väl godkänd, Vg, 75% or more), Pass (Godkänd, G, 50% or more) and Fail (Underkänd, U, less than 50%). To receive the grade Pass with distinction in the course, the student must have achieved at least 75% of the total of points in the separate modules or the equivalent Students who do not pass at the time of the normal written examination will be offered an opportunity to sit a further examination within 2-3 weeks. Beyond that, additional examination opportunities normally arise every academic year, one week prior to the start of the autumn term. When a student has failed an examination in two occasions, he or she has a right to have another examiner. A written request should be handed to the director of studies no later than two weeks before the next examination opportunity. Grades on the course are awarded when students have passed all examinations and compulsory course elements. 6. Utilisation et cetera Where there are students taking this course as part of an exchange or other external programmes, the course will be taught in English. Where all students taking the course are Swedish, parts of the course may be taught in either Swedish or English. Information on the teaching language can be obtained from the Student Counsellor. Other Regulations Acknowledgment/Plagiarism: Plagiarism is not acceptable and may result in the imposition of severe penalties. The University provides clear guidelines on its attitude towards plagiarism and how to avoid unintentional plagiarism. Students are advised to read these carefully. If any doubts remain as to what constitutes plagiarism, students should discuss the matter with the lecturer(s). Acceptable Calculators in Examinations: Students may use scientific or financial calculators. They may not use programmable calculators identified by their alphanumeric keyboard. Study Time: Students are expected to prepare a significant amount of material outside of the classroom in order to fulfil course requirements. Previous indications suggest that students should treat this subject as full time work and invest a minimum of forty hours in preparation and attendance. 7. Readings and other materials Module 1. Corporate finance (5 points/7,5 ECTS) Ross S.A., R.W. Westerfield and J. Jaffe, 2005, Corporate Finance, 7th Edition, McGraw-Hill, New York Two cases provided in bulk pack from McGraw Hill will be used in tutorials. These are changed annually. Web site The Accounting and Finance web site www.usbe.umu.se/master/accounting, provides students with up to date information on the subject as well as any changes to the curriculum. Students are expected to access this site regularly to stay in touch with subject requirements. The web site provides students with access to the queries of their peers as well as lecturer responses to those queries, eliminating the chance of miss-understandings that come from “he-said” “she-said” repetitions. The site also contains copies of overheads used in lectures. Additional web based resources are available through the publisher, including www.mhhe.com/rwj which provide students with an opportunity to test their own progress during the course through interactive exercises and self-grading quizzes. Supplementary Readings Brealey, R.A. and S.C. Myers, 2006, Principles of Corporate Finance, 7th edition, Mc-Graw Hill, New York Ogden, JP, F.C. Jen and P.F. O’Connor, 2003, Advanced Corporate Finance: Policies and Strategies, Prentice Hall, New Jersey Module 2. Advanced financial statement analysis and valuation (5 points/7,5 ECTS) Required (assigned) text: Penman Stephen., Financial Statement Analysis and Security Valuation, Irwin/McGraw-Hill. E/2. 08/2003. In addition a number of research papers will be included. Supplementary readings: Copeland T, Koller T, Murrin J, Valuation: Measuring and Managing the Value of Companies, Wiley, 2000, 3rd Edition (a good introduction to valuation, written in English). Stickney P, Financial Reporting and Statement Analysis: A Strategic Perspective, Dryden Press, 4th Edition, 1999. (a good book about financial statement analysis). White G, Sondhi A and Fried D, The Analysis and Use of Financial Statements, Wiley, 2nd Edition, 1998 (a good book about financial accounting and financial statement analysis) --------------- Umeå University, Umeå School of Business, SE-901 87 Umeå, Sweden.