Topic| Study Program|
The Realm of Corporate Finance and Efficient Market Hypothesis| * Overview of finance’s main functions & its importance to organisations. * Importance of value creation as the primary objective of managers * Efficient Market Hypothesis (EMH)| Financial Statement Analysis| * Overview of calculating & interpreting accounting & financial ratios from corporate financial statements & understanding their significance in corporate finance.| Investment Appraisal Methods| * Main techniques used by firms in practice for evaluating investment opportunities. * how to estimate cash flows and how to deal with the problem of inflation| Long-term Financing Sources & Valuation| * Methods of raising equity capital, the cost of going public, common types of bonds issued by firms and the valuation of equity and debt securities.| Portfolio Theory & CAPM| * Relationship between risk & return * CAPM * Total Risk * Systematic Risk & Unsystematic Risk| The Cost of Capital & Capital Structure| * The choice of the mix of debt & equity used to finance a firm is known as the capital structure decision. * deciding upon the gearing level for the company. * Influential theories of gearing. * Factors influencing gearing decisions.| Payout Policy| * How companies determine what level of dividends should be paid out to shareholders. * Whether dividend policy is relevant to firm valuation. * Arguments in favour of high or low payouts.| Mergers & Takeovers| * How mergers & takeovers play a vital role in CF.|
The Realm of Corporate Finance
* Fundamental problem addressed by CF: how best to allocate the limited resource of money. * TWO key concepts in corporate finance:
1. Relationship between risk & return – With higher risk we require higher return 2. Time value of money – i.e. that £100 now is worth more than £100 in future due to, time, risk and inflation.
Financial Decision Making
* For a manager to be effective at making financial decisions they need a clear understanding of the principles & practices of modern finance. * Finance and financial decisions are the key to success – but can fail if managers don’t consider financial aspects of the businesses activities. The Subject Matter of Finance
* How financial decisions within companies are and should be taken. * How the characteristics of financial markets affect that decision-making process * How does the competitiveness, regulation & pricing efficiency of financial markets impact on the decision-making process within companies?
If you have just set up a business
* What are the main issues that you will need to address if you are to be successful?
3 Long-term Strategic Questions
* Allocating Funds (Investment Decisions)
* What long-term assets should the business invest in? E.g. buildings, machinery and equipment
* Raising Funds (Financing Decisions)
* Where should the money come from to pay for your long-term investments? E.g. should you provide all the money (capital) from savings, take out a loan or will you ask other people (perhaps family and friends) to provide some money and become part owners?
* Dividend Decisions
* (Assuming the business is successful) What should the business do with excess earnings - should it pay them out in the form of dividends to the owners of the company, or should it retain those earnings within the firm for reinvestment?
These three decisions are all interconnected. E.g. If a company decides to invest in a new project they may decide to reduce dividends (dividend decision), this will rise the funds for reinvestment (financing decision) to appropriately allocate funds (investment decision) for the new project.
Sources of Long-term funds
* Capital is the name given to the long-term funds used for the running of a business. * The places where these funds...