EXC 2110 Basic Financial Management
The essence of business administration includes corporate finance (=investment and financing). Good knowledge within these areas is a necessary prerequisite to understand the economic content of investment and financing decisions, obtain decision-relevant information, discuss and assess alternatives, make correct decisions and convey relevant and useful information.
The aim of the first course within the field of corporate finance is to provide the students with essential basic knowledge and skills, so that they can take part in discussions on problems in finance and carry out simple analyses within the field, make correct decisions and communicate the results of the analyses in a comprehensible manner.
The course Basic Financial Management is mainly focused on capital budgeting. By studying the main activities carried out in a company as an investment project over several periods, emphasis is placed on considering all economic effects of the project and of taking a long-term perspective (over several years, until the project is completed). The course therefore starts with capital budgeting. The finance area also focuses on how uncertainty affects decisions on which investments should be made (the risk and return on individual projects and portfolios) and owners, creditors and companies capital costs.
After taking the course, the students shall be able to explain key concepts and give an account of the tools used in analyses of finance problems (these tools include methods, techniques, models, theories, etc. applied in the subject area).
- Examples of concepts that students shall be able to explain: sunk cost, present value, future value, income statement, annuity, cash flow and risk adjusted cost of capital, variance, standard deviation, expectation, efficient portfolios, risk aversion, bonds, market efficiency, anomalies, risk premium.
- Examples from the toolbox: cash budget, investment budget, net present value, internal rate of return, capital asset pricing model, portfolio theory.
After taking the course, the students shall be able to (a) apply knowledge (i.e. concepts and skills) in analyses and discussions on financial problems, (b) distinguish between relevant and irrelevant information, and (c) give written answers to questions so that the readers understand the applied methods and conclusions. Examples:
- When the tool is given, be able to apply the tool correctly
- Based on simple situation descriptions, choose the right tool and apply it correctly
- Based on more complex situation descriptions, be able to produce relevant information, link it to the suitable tool and apply the tool correctly
- After taking the course, the students shall be able to ask critical questions and reflect on crucial assumptions and theories within the business economics field.
1. Introduction and Overview: ch. 1
2. How to Calculate Present Value: ch. 2
3. Valuing Bonds: ch. 3
4. The value of common stocks: ch. 4
5. Net Present Value: ch. 5
6. Making Investment Decisions: ch. 6
7. Introduction to risk and return: ch. 7
8. Capital Asset Pricing Model:ch. 8
9. Risk and Cost of Capital: ch. 9
The course will include a combination of lectures and plenary tutorials where solutions to exercises will be explained.
The students are responsible for obtaining any information provided in class that is not included on the course homepage/It's learning or the text book.
Students are advised to make use of computer-based tools in the course, for instance spreadsheets.
Basic bachelor courses in Mathematics and Statistics.
|Exam category||Weight||Invigilation||Duration||Support materials||Grouping||Comment exam|
Form of assessment:
Examination every semester
|Form of assessment:||Structured test|
|Support materials:|| |
|Exam code:||EXC 21101|
|Resit:||Examination every semester|
|Workload activity||Duration||Type of duration||Comment student effort|
|Review of assignments in plenary||6||Hour(s)|
|Prepare for teaching||118||Hour(s)||Preparation for lectures and plenary tutorials and |
work on two voulentary hand-in assignments.
|Self study||40||Hour(s)||Preparation for the final exam.|
|Workload activity:||Review of assignments in plenary|
|Workload activity:||Prepare for teaching|
|Comment:||Preparation for lectures and plenary tutorials and |
work on two voulentary hand-in assignments.
|Workload activity:||Self study|
|Comment:||Preparation for the final exam.|
A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 7,5 ECTS credit corresponds to a workload of at least 200 hours.