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 provide students with an opportunity to acquire a high level of expertise in central areas of financial management of firms, covering topics such as firm valuation, financing, investments, as well as risk management. While each of the modules cover different aspects of the financial management of companies, module 1-3 constitute the basis for the understanding of the fourth module.

The course is given and examined in English.

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

Module 1. Advanced financial statement analysis and valuation, 7.5 ECCTS
The module aims to provide students with relevant theories, methods and models for valuing companies and their securities, primarily equity (common stock). The module deals with the analysis of financial statement information and the use of this information for business strategy analysis, performance evaluation and investment decisions. Accounting and discounted cash flow approaches to valuation are discussed as are forecasting of dividends, earnings, cash flows and pro forma analyses. During the module, students will also be introduced to the code of academic conduct, e.g. referencing, or how to avoid plagiarism and cheating.

Expected learning outcomes:
After successful completion of the 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 forecasting and valuation
• analyze market prices, value drivers and financial measures, e.g., profitability, growth, P/B and P/E ratios, and their relations to estimated fundamental value
• explain the relations between accounting standards, e.g. IFRS and US GAAP, accounting methods and value
• practice working 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
• describe, recognize and apply the code of academic conduct to the student’s own work.

Focus of instruction:
The core topics of this module are covered by lectures, seminars, literature i.e. text book and research articles, cases and projects. Students are expected to take an active part in every aspect of the module.

Examination modes
Examination is based on a written comprehensive exam, on successful completion of a project and an individual exam on the code of academic conduct. See also note 6 below.

Module 2.   Advanced Corporate Finance, 7.5 ECTS
The primary purpose of this module 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. 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.

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 explain the expected impact of alternative taxation systems on the use of debt in a firm’s capital structure
• argue for 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
The core topics of this module will be covered through lectures, as well as in smaller group workshops and 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 the Investments module are provided with an opportunity to learn relevant theories and models to acquire a specialization at an advanced level in investment analysis. In the module fixed income securities 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 module. 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, an essential tool for modern risk management, is further covered in the context of investment management. The module, finally, also include coverage of portfolio management strategies and measurement of portfolio performance.

Expected learning outcomes
After completing the 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 these in hedging investments and their impact on potential return and risk
• 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. See also note 6 below.

Module 4. Risk management 7,5 ECTS
A general principal in finance is that there is a trade-off between expected return and risk. Minimizing the cost of risk to an optimum level unanimously means increasing the value of a firm. Much has happened in financial markets that has highlighted the importance of risk management in financial institutions. The module covers traditional risks such as market and credit risks, and then focuses on recent developments regarding liquidity, operational and model risks. It combines discussions around the concepts and mathematical approaches of volatility and Value at Risk and also highlights the role of trading, regulations and innovations. Most of the module is concerned with the way risks are managed by financial institutions, but many of the ideas are equally applicable to all kinds of businesses.

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

• Analyse the risk-return trade-off, systematic risk and total risk, as well as, apply methods and models for trading in financial markets, manage different types of risks, measure volatility and Value at Risk.
• Analyse the effects of Basel III and other types of regulation.
• Analyse the various alternatives for risk management and the selection of the optimal policies.
• Work with the theoretical and research based knowledge in the area of risk management.
• Produce detailed and coherent reports in matters related to assessing risk management in a financial institution.

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 oral presentations at seminars and during case analyses and to submit written 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. See also note 6 below.

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 respective 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 literature and other relevant course materials.

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.