Finance 331
Business Finance
Required Text: Fundamentals
of Financial Management, concise fifth edition.
Catalogue
Description: Principles of business finance with emphasis
on financial analysis, investment decisions, cost of capital, and procurement
of funds. Prerequisite: ECON 202, 203,
230 and ACCY 202.
Prerequisites: Accounting 201
and 202 should have been PASSED prior to enrolling in this course. It is also advisable to have taken or be
concurrently taking Accounting 301.
Students should also have completed Economics 202, 203 and 230 with a
minimum grade of C in each course.
Objectives: To give a good
overview of financial decision making from the viewpoint of the CFO (chief
financial officer), financial vice-president or comptroller. Emphasis is placed upon the balance sheet and
the impact of decision that affect both general and specific balance sheet
accounts (current assets, fixed assets, debt and equity accounts) upon the
profitability, risk and cash flow of the firm.
Class
Meetings: Tuesday & Thursday from
2:30 to 3:415, Conner 111.
Course
Format: The course will be a combination of lectures
and discussion, with an emphasis upon financial decision making. Typically, there
will be a lecture on a topic, class discussion or questions of points covered
in the lecture, and finally solution and discussion of an illustrative problem.
Grade
Determination
Test I ‑ Short‑Term
Assets and Liabilities 300 pts
Test II ‑ Capital
Budgeting 300 pts
Test III ‑ Risk
Analysis 300
pts
Final
Examination (Cost of Capital, etc.) 300 pts
Homework 100
pts
Tests: Tests will be primarily problems with some discussion
and interpretation of solutions, etc. A
few objective questions may be used on one or more of the tests. Each student may elect to drop one test
grade. No makeup tests will be
given unless a student misses two tests and has a valid excuse for missing BOTH
tests, in which case a special makeup will be given during finals. Excuses for any missed test MUST be
presented to the instructor IMMEDIATELY (!!!) after the student misses a test. Valid excuses will primarily be limited to chronic
illness and death in the immediate family (weddings are not included ‑
even your own). Everyone is expected to
take the final (i.e. students may only elect to drop one of the three regular
tests and not the final exam). Also students should not expect an incomplete to
be given in lieu of a low grade.
Homework: The quality of
classroom discussion depends heavily upon the degree of student
preparation. Students who have not
read the text AND attempted to work homework problems before coming to class
will have trouble passing this course.
Accordingly 10% of the course grade is contingent upon the homework
grade. Concerning homework the following
suggestion and rules apply:
1. Hand‑in
assignments will be graded on the basis of 0 - 5. Work not turned in will be graded zero.
2. To
receive credit for an assignment, papers must be turned in at or before class
time. While students do not have to be
physically present to turn in each assignment, late work will be accepted only
under extremely unusual circumstances
(Example, emergency
operation as opposed to planned surgery as under the latter students should
make arrangements to hand the assignment in early). Excuses for such emergencies must be cleared
with me AS SOON AS POSSIBLE!!!
3. Homework
will be graded primarily based upon an assessment of the effort that went into
working assigned problems. This means
that the solution does not have to be 100% correct to receive maximum credit (5
points). Your ability to reach the
correct solution on similar problems will be tested on exams not in the
homework.
4. Save
your homework. You will find it useful
in studying for tests.
Office
Policy: My office is Holman 337. I will be glad to talk to you about material
that you do not understand in this course, your performance in this course,
majoring in finance, problems that you may have which might affect you class
performance, etc. I will not, in
general, be available to help you will assignments in other classes or to help
you with homework assignments before they are covered in class (except to
answer specific questions of a clarifying nature). Feel free to contact me by:
(1) Setting up an appointment to talk before or
after class or calling me by telephone me at 915-5464.
(2) Contacting me by email - pmalone@bus.olemiss.edu
or by using my web page address as follows: http://faculty.bus.olemiss.edu/pmalone
(3) Coming by the office during regular office
hours
(4) Coming by the office during special
(announced) hours prior to each test.
(5) Dropping by the office anytime {here you are
taking your chances as (1) I may not be in or (2) I may be busy with something
else in which case I will make an appointment to talk with you later}. Regular Office Hours for the fall semester
are 11:00 to 12:30 on Tuesday and Thursday.
Statement
of Academic Integrity: The
Cheating: Any student
caught cheating will be assigned an F in the course. In most cases a statement will also be made
to that effect in the student's record.
Grading
Scale: A modified 100-point scale will be used in
assigning final grades. All students
having a final average of 900 or more will receive an A (likewise 800 or more a
B; 700 or more a C and 600 or more a D).
Any reduction or modification in the minimum average to receive a
particular grade will be made consistently across all students (e.g. a student
with an 893 will not be awarded an A grade and one with an 896 a B). Determination of the final breakpoint (if
lower than 900 for an A) will be made on the basis of difficulty of tests,
distribution of final averages, and natural gaps in the distribution of final
averages. The same is also true for B, C
and D grades.
FINAL
EXAMINATION: Everyone must take the final exam. For the fall semester of 2008 the examination
for this class is scheduled for 4:00 pm Monday, December 8.
Cell
Phones: All cell phones must be turned off
during class and exams. They disrupt
lectures and use during exams may undermine the integrity of the examination
process. Failure to turn off a cell
phone will result in a grade reduction for that examination.
TOPICS COVERED:
Topic
Classroom Hours
1. Introduction
.5
2. Taxes
1
3. Financial Analysis 4
4. Financial Forecasting 2
5.
Working Capital Management 2.5
6. Time Value of Money 3
7. Capital Budgeting 5.5
8. Risk Analysis
4.5
9. Valuation
3
10. Financial Markets 1
11. Cost of Capital (including Capital Structure) 5
12. Dividend Policy 1
13. Special Topics (Ethics, Agency Theory,
Leases,
Acquisitions, International, etc.) 2
14. Examinations and Review 7
TOTAL
HOURS: 42
*includes 3 hour final examination period
INTEGRATED THEORETICAL FRAMEWORK
(Financial Managers point of view)
A.
Objective is to follow those policies which will maximize stockholders'
wealth (The financial manager is ultimately responsible to the shareholder for
his/her job)
B.
Model ‑ S/H Wealth =
f(A,L,E,T,B)
A = assets of the firm
L = liabilities of the firm
E = economic environment ‑
existing and expected
T = tax structure
B = all other internal business
variables such as decisions
made by management, production, etc.
E and T are external
variables. The firm must make decisions
given the tax structure and economic environment. The latter includes the
general economy (macroeconomics), the competitive structure of the industry
(microeconomics) and the international economic environment. While these variables are external to the
firm, decisions should be made in light of them.
B is internal to the firm
but somewhat external to the financial manager and includes marketing strategy,
legal and ethical considerations, agency theory, labor management issues,
organizational structure, etc. B not
only provides direction but also imposes restraint upon the action that the
financial manager may undertake.
A and L are your
controllable variables. That is the
assets, liabilities and equity of the firm are subjected to your control. In
turn the size of the firm will be determined by your decisions.
S/H Wealth = f(A, L / E, T, B)
C.
Assume that you are now the financial VP and that you are responsible to
the firm's shareholders for your job.
They are counting on you to protect their investment in the stock of the
company. You occupy a position of trust
and are not assured that your job will be permanent if the firm's performance
should be poor.
D. You
now have a theoretical basis for making optimal financial decisions. In doing so you should be able to answer the
following questions:
1.
What assets?
2.
What liabilities (and equities)?
3.
What size?
You should find that your
answer to 1 and 2 (above) will jointly determine the answer to question 3.
COURSE OUTLINE
┌────────────────────────────┬─────────────────────────────┐
│ │ │
│ │ │
│ │ CURRENT LIABILITIES │
│ CURRENT ASSETS │ │
│ │ │
│ │ │
│ ├─────────────────────────────┤
├────────────────────────────┤ │
│ │ LONG-TERM DEBT │
│ │ │
│ ├─────────────────────────────┤
│ │ │
│ FIXED ASSET MANAGEMENT │ │
│ (Capital Budgeting) │ EQUITY │
│ │ │
│ │ │
│ │ │
└────────────────────────────┴─────────────────────────────┘
MATERIALS COVERED AND PREREQUISITES
MATERIAL
BACKGROUND PREREQUISITES
TEST I Current Assets & Liabilities Accounting
ACC 201,202
TEST II Fixed Assets Math Math 121 &
267
TEST III Risks Statistics Economics 230
FINAL Above + LTD & Equity Economics Economics 202
A good business (financial
calculator) is recommended for this course such as one of the following:
Sharpe EL-733
or EL-533
Hewlett Packard any of
financial (the 12c is the hardest and the 10B the easiest to use)
Casio financial
series is OK
(any with regression and cash flows is OK)
Financial Calculators may
be used on all examinations. However,
students are responsible for making sure that all memory buffers are cleared
prior to commencing all tests. Course
reference materials such as text, outlines, formulas etc. may not be brought to
any exam or tests. Students who violate
this provision will be assigned an F grade in the course and a reference to
cheating on an exam will be made on their university record.