Corporate Finance and Analysis D, 15 Credits

Contents

This finance course is intended for students who want to increase their familiarity with the practical applications of corporate finance and investments.

1. Module Advanced financial statement analysis and valuation, 7.5 hp/credit points
2. Module Advanced corporate finance, 7.5 hp/credit points

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.

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 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 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 litterateur and other relevant course materials.

Student who has passed an examination can not redo the examination to get a higher grading.

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

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.