Financial Management D, 30 Credits

Contents

This finance course is intended for students who want to increase their familiarity with the practical applications of financial management. The four modules, combined, provide students with a high level of expertise in the financial management of companies whether small or large, local, regional, national or multi-national. Many of the academic staff have experience in business, from running their own firms to sitting on corporate boards.

1. Module Advanced financial statement analysis and valuation, 7,5 ECTS
2. Module Advanced Corporate finance, 7.5 ECTS
3. Module Investments, 7.5 ECTS
4. Module Risk management, 7.5 ECTS

Module 1.   Advanced financial statement analysis and valuation, 7.5 ECTS
This module is relevant for 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 for business strategy analysis, performance evaluations and investment decisions. The module integrates accounting, finance, economic theory, and empirical research into a financial statement analysis and valuation framework. The primary purpose in presenting the module is to provide students with relevant theories, methods, and models for valuing companies and their securities, primarily equity (common stock). A spreadsheet program is used throughout the module as a practical tool for conducting financial statement analysis and valuation, including the creation of forecasted income statements and balance sheets (pro-formas). A brief summary of topics includes: models of shareholder value and a comparison of accounting and discounted cash flow approaches to valuation; analysis of the firm’s profitability, growth, and value generation; forecasting of earnings and cash flows and pro forma analyses; and analysis of price-earnings and price-to-book ratios. Ethical issues and the social responsibility of corporations and their managers are highlighted.

In addition, students are introduced to what good scientific practice means; i.e. how students and instructors can create and maintain a constructive learning environment while preventing misconduct and fraudulent behavior such as plagiarism. Students are, therefore, required to carefully study the guide of ethical and professional behavior, which is aligned with the rules and regulations of Umeå University. Since knowledge of these rules and regulations are fundamental for coming courses and thesis writing this module includes a web-based test to ensure that students understand how to follow these guidelines in practice.

Expected learning outcomes (ELO)
After completing this module, the student should be able to:

• value the equity, operations and debt of companies using different valuation approaches/models and financial statement information.
• analyze and reformulate financial statements to uncover a firm´s business strategy and value drivers so as to facilitate analysis, forecasting and valuation.
• analyze value drivers and financial measures, e.g., profitability, growth, P/B and P/E ratios, and their relations to value.
• forecast relevant value drivers and other quantities needed for valuation including the development of pro-forma financial statements.
• explain the relations between accounting standards, e.g. IFRS and US GAAP, accounting methods, accounting quality and value.
• evaluate corporate social responsibility disclosure.
• describe and apply ethical/professional learning and research conduct

Generic ELO:

• work efficiently in teams in which the members may differ as regards field of specialization, gender, nationality and cultural background
• conduct, write, present and critically review an equity research project
• use a spreadsheet program as a tool in financial statement analysis and valuation

Focus of instruction
The core topics of this module are covered by lectures, seminars, research articles (max 40 pages), cases, projects and computer exercises utilising a spreadsheet program. Students are expected to take an active part in every aspect of the module.

Examination modes
Examination is based upon a written comprehensive individual exam and on successful completion of a project. Furthermore, each and every student has to pass the web-based test on ethical behavior and professional conduct. A passing grade is required for each part of the module.

Module 2.   Advanced Corporate Finance, 7.5 ECTS
Our primary intent, in offering this subject, is to provide an integrated overview of the most important concepts in corporate finance. The subject extends the student’s knowledge about the context in which corporations operate. It also serves as the foundation for the package of subjects that the student will select within the Finance programme.

Topics to be covered in this module include capital market imperfections and methods developed in finance  to control risk and reduce uncertainty in the financial management of corporations.  Issues in corporate policy and strategy, based on theoretical developments in finance are presented.  Students will learn the processes involved in the valuation of debt and equity and the methods that have been used to manipulate external perceptions of business outcomes.  Optimization strategies and approaches to recovery from financial distress are also covered.

Expected learning outcomes
After completing this module, the student should be able to:

• assess the impact of information asymmetry on corporate financial policy decisions from the selection of particular modes of financing to dealing with the problems associated with financial distress
• explain the theoretical basis and applicable strategies applied in regard to issues of corporate control
• compare and contrast leverage strategies in ideal versus real capital markets and be able to predict the impact of alternative taxation systems on the use of debt in a firm’s capital structure
• determine optimal levels of corporate debt and/or equity and be able to price an offering of either under different financing strategies
• formulate and logically defend  a position in regard to current issues, such as corporate control and governance, which confront corporations today

Focus of instruction
This subject will be presented using large group lectures as well as smaller group workshops and/or seminars.

Examination modes
Examination is based upon a written comprehensive individual exam and group assignments. A passing grade is required for each part of the module.

Module 3.   Investments, 7.5 ECTS
Students undertaking this module are provided with a specialization at an advanced level in investment analysis. Students will be provided with the knowledge needed to understand relevant theories and models in the field.  They will be able to apply these to stock and bond portfolio management. The module is used to provide students with a lasting conceptual framework from which to both view the investment process and to analyze future ideas and changes in the investment environment.

In this module fixed income securities, mainly bonds, are reviewed in terms of valuation and portfolio management. This includes coverage of concepts as duration analysis, convexity and immunization.  Derivative securities (options, futures, swaps and convertibles securities), their pricing and relevant parity-relationships are emphasized and studied within the course. The creation of synthetic securities and the construction and maintenance of various hedging strategies for both portfolios and individual securities using different derivatives are also discussed. The concept of  Value at risk, as well as, including back- and stresstesting, essential tools for modern  risk management,  are also covered in the context of investment management. Finally, students are taught how to measure the performance of managed portfolios.

Expected learning outcomes
After completing this module, the student should be able to:

• value fixed income securities and measure their associated risk.
• apply active and passive portfolio management techniques to fixed income securities
• calculate value at risk (VAR), as well as, perform backtesting for individual securities and portfolios
• value derivatives and explain the use of various derivatives in hedging investments and their impact on potential returns, as well as, value portfolios containing derivative securities
• evaluate portfolio performance using, for example, risk-adjusted metrics

Focus of instruction
The core topics of this module will be covered by lectures, although seminars, cases and computer exercises utilizing Excel may also be used. Students are expected to play an active role in every aspect of the course module.

Examination modes
Examination is based upon a written comprehensive individual exam and group assignments. A passing grade is required for each part of the module.

Module 4. Risk management 7,5 ECTS
Minimizing the cost of risk to an optimum level unanimously means increasing the value of a firm.
Businesses of all sizes are realizing the importance of risk management issues and applying sophisticated tools to their cash flow statements. Managers and entrepreneurs are expected to know what to do with their cash and currencies and when to do it. They must be able to forecast and budget properly, project flows over varying lengths of time, streamline operations, and know the best methods for maximizing balances and investment returns while minimizing company risks.
Experts in the field will teach students how to interpret key concepts, define interest and exchange rates and risks, and identify short-term investing and borrowing techniques. They will also explore specific techniques to cross-border cash management and review instruments used to manage financial risk.

Participants will gain a basic overview and understanding of cash management topics with an emphasis on risk management. The module covers:

• The role of capital, inventory management, policy of payment on credit and debt collecting, liquidity analysis, managing relations with banks, monetary forecasting, money markets, management of short term investments and strategies of short-term financing.
• Management of international monetary inflows and outflows.
• Interest risk management on organised markets.
• Foreign exchange risk management, objectives and methods.

Expected learning outcomes
In this program, students acquire a foundational overview and understanding of risk management problems and solutions.
After completing this module, the student should be able to:

• reflect upon the financial instruments, payment methods and mechanisms involved in cash and foreign currencies inflows and outflows
• assess the adequacy of corporate cash conversion and operating cycles
• identify firm objectives and construct appropriate methods for receipt collection and disbursement control
• manage financial risk through various interest and exchange rate hedges

Focus of instruction
Teaching is conducted through lectures, seminars, case studies, and course papers. The core topics will be covered by lectures and seminars, in which students will be expected to take an active part. Cases related to the topics will also be used. Students are required to make written and oral presentations at seminars and during case analyses and to submit course papers.

Examination modes
Examination is based upon a written comprehensive individual exam and group assignments. A passing grade is required for each part of the module.

Expected learning outcomes

See respective module.

Required Knowledge

University: Courses in Business Administration (75 ECTS) At Basic level (A-level) and Intermediate level (B-level) a minimum of 60 ECTS in Management, Marketing, Accounting and Finance courses. At the C-level (Bachelor), a minimum 15 ECTS. Statistics or similar 7.5 ECTS. Language: Proficiency in English equivalent to Swedish upper secondary course English B (IELTS (Academic) with a minimum overall score of 6.5 and no individual score below 5.5. TOEFL PBT (Paper-based Test) with a minimum score of 575 and a minimum TWE score of 4.5). TOEFL iBT (Internet-based Test) with a minimum score of 90 and a minimum score of 20 on the Writing Section)

Form of instruction

See respective module.

Examination modes

See also above under respectively module.
The following grading system will be used:
Pass with distinction (Väl godkänd, Vg, 75% or more),
Pass (Godkänd, G, 50% or more)
Fail (Underkänd, U, less than 50%).

To receive the grade Pass with distinction (Väl godkänd) on the course, the student must have achieved that grade in three of the four modules.

Students who fail to present a photo ID at the occasion of a written examination cannot have their results registered.

In case of failure on seminar participation or individual and group assignments, compensating assignments must be completed in accordance with instructions given, no later than two weeks after the completion of the module.

Students who do not pass at the time of the normal written examination will be offered an opportunity to sit a further examination within a month. 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 on two occasions, he or she has a right to have another grading teacher. A written request for an alternative examiner should be handed to the director of studies no later than two weeks before the next examination opportunity.

Rules and regulations concerning the production of academic texts and correct referencing will be applicable to all written assignments. (see instructions in the Thesis manual. Thesis writing in Business Administration.) Urkund records may be used for control.

Lectures are normally not obligatory. However attendance is expected because the lectures are designed to facilitate students towards achieving course specific learning objectives. In addition lectures often provide insightful explanations of, and can supplement and provide contrast to, the course literatere and other relevant course materials.

A student who has passed an examination cannot retake the examination to get a higher grading.

Grades on the course are awarded when students have passed all examinations and compulsory course elements.

Academic credit transfer
Academic credit transfers are according to the University credit transfer regulations.

Other regulations

This is a course at the D-level in an MSc-degree at Umeå University. The course can also be included in study programs in Business Administration and Economics at Umeå School of Business and Economics.