ISU FIL 440

Assignments all due August 1

2011-07-25T08:30:00.000-05:00

All homework is due by Monday, August 1st. I should be around most of the time over the next week, so feel free to call or email.

Attached is the individual assignment as well.

Good luck with the rest of the program!

Estimating WACC in practice

2011-07-23T07:41:00.000-05:00

Check out the paper posted on the U: drive called "Estimating WACC in Practice". Most of the paper discusses the challenges of estimating the cost of equity.

Exam scores sent

2011-07-13T16:59:00.000-05:00

For those who sent me a confirmation email, I've mailed all grades from the first exam. If you have further questions, let me know.

If you didn't receive your grade, it's likely because you didn't send me an email granting me permission (yes, in addition to signing the sheet. Sorry to be so "legal".) If you want to know your score, send me an email from the account that you signed up for on the first weekend.

Material on the second exam

2011-07-13T08:31:00.000-05:00

The second exam is not explicitly cumulative, but of course some material assumes that you have learned prior stuff (e.g., you can't calculate operating capital unless you feel comfortable with financial statements). The format of the exam will be similar to the first, but there will likely be more written answer and less multiple choice. I certainly would not be surprising anyone by saying that you should feel comfortable with capital budgeting techniques and cash flow estimation.

Chapter 2 - taxation and financial measures (NOPAT, operating capital, etc.)
Chapter 12 - forecasting
Chapter 10 - capital budgeting techniques (NPV, IRR, etc. - but no profitability index)
Chapter 11 - estimating cash flows, but no risk analysis

Though I don't think most people will need it, you will be allowed 2 hours to complete the exam. You can have a page of notes, your calculator / phone app / excel, and a writing instrument. Also, please bring some additional paper for written answer questions.

I will not be available this Friday, but will be here all next week. Let me know if you would like to talk or would like to stop by.

Forecasting assignment - data

2011-07-09T07:25:00.000-05:00

A spreadsheet with all the numbers.

Material on the first exam

2011-06-28T18:58:00.000-05:00

Since we jumped around a bit last weekend, I wanted to be explicit about what will be on the first exam on July 8th. The following is fair game for exam questions.

All of chapter 1
Chapter 2 to page 55- the structure of financial statements and accounting conventions as seen in the videos

All of chapter 3 - financial statement analysis
All of chapter 4 - time value of money
Most of chapter 5 - but especially valuation and finding the YTM. But NOT yield to call, yield curve/term structure stuff.
All of chapters 6 and 7

I'd say that is more than plenty. You will have 2 hours to complete the exam, but I expect it won't take most of you that long. Feel free to use the full 2 hours. Don't forget your opportunity for a 8.5" x 11" notes page - you can write on both sides.

Have a Happy Fourth of July!

Ratio problem set - spreadsheet

2011-06-25T15:29:00.000-05:00

Here is the financial statements for the group problem set on ratios

Video link - amortized loans

2011-06-23T09:52:00.000-05:00

As most of you are aware by now, the link to "amortized loans" presentation isn't working - YouTube stopped liking this video. (Sometimes technology is soooo frustrating... but I digress).

I will talk about this material early on Friday night. See you this weekend

Welcome to FIL 440 - Financial Management!

2011-06-02T11:26:00.005-05:00

Welcome to FIL 440 - Financial Management! On the June 4th, I passed out the course syllabus. This website will be used to post announcements made in class and distribute information. Generally, if I have posted anything on the site, I likely would have made some similar announcement in class. If you've temporarily forget any of these classtime announcements, check here first.

This site also allows you to add comments at the end of each posting. Feel free to ask questions about any of the materials available. I'm interested in your feedback on this site.

Other stuff that is available on this site:

Schedule and notes: This page give a rough timetable of what topics we will be covering and when. Please recognize that this schedule is somewhat flexible - I will try to update the schedule if there are changes. Also posted on this schedule are notes for the material to be covered in class - please download the notes before coming to class. Please note that for most chapters in the text, I generally walk through the mini-case at the back of each chapter. These mini-cases are great summaries of each chapter's highlights. If you take a quick glance at the mini-cases, you will get a good idea of the focus of class time.
Study guide/Review: This page has a chapter-by-chapter review which may be helpful as you review for the exam. Each chapter has an outline of topics, a list of terms that you should be familiar with, and suggested problems from the text. As you go through the review sheet, it should jog your memory about each of the topics. The suggested numerical problems are very basic, but should help you recognize key concepts from each chapter.
Blackboard: I will use Blackboard to distribute grades and post the answers to the mini-cases at the back of the chapters (copyright issues).

Early in the class, we will use financial calculators, so try to get your calculator as soon as possible and bring it with you to class (I will be using the TI BAII-Plus and highly recommend that calculator but any financial calculator will do). You can also just get a phone app or use Excel (even on exams).

Please download the notes on the course schedule page (also see link above) before coming to class.

A word of “warning”: the concepts in this course build on itself very quickly. For example, if you are not comfortable with the material in Chapter 4 (time value of money), then bond and stock valuation will be more difficult. Further, if both Chapters 2-4 are fuzzy, then capital budgeting will sound like Greek. The speed of a CMBA course complicates things further. Thankfully, finance is fun so sitting down and doing it won't be a problem.

Before Coming to class on June 24
Check out the schedule to see the list of stuff to do before our first meeting.

Textbook online resources

2011-06-02T05:11:00.000-05:00

There are a number of resources that are included with your textbook purchase that may interest you. These are available at the textbook's website and have to be downloaded/unzipped.

Build a model spreadsheets: These are Excel-based problems that included for most numerical chapters. At the back of each chapter, there are many numerical questions, including a "spreadsheet problem" (usually the last problem in each chapter, right before the mini-case). Finance uses spreadsheets a lot so the spreadsheet problem for the textbook just allows you to use Excel to solve problems. The "build a model spreadsheets" documents the spreadsheet problem and provides some instructions as to how students can solve the problems in Excel.
Excel tool kits: These spreadsheets document all the calculations that are done in the text's presentation. For each chapter, if there are calculations performed during the discussion, they will all be shown in the "tool kits". Use these to follow along with the readings.
TVM: Some instructors like to use financial tables when performing discounted cash flow analysis (time value of money calculations). In FIL 440, we will not use tables, but instead we will use financial calculators (or Excel) to solve problems. Therefore, you do not need this spreadsheet.
Web chapters: These are basically appendices to many of the chapters in the book. Sometimes they provide more information about a particular subject and other times they provide more advanced discussion just for completeness. From time to time I may mention these web extensions in class.

FIL 440 Spring 2011 Schedule

2011-05-20T01:29:00.022-05:00

Before Coming to class on June 24
On Friday, June 3rd, I passed out the syllabus. As you begin the course, much of the material in the early part of the course is “supposed” to be review of material that you have seen at some point earlier in your academic and/or professional career. Of course, I know that for some of you, this exposure may have been years ago during a time that you didn’t realize how fun and useful finance can be. These fundamental tools are used over and over in this class, so it’s important that you feel comfortable with these fundamental concepts. If some of these concepts are already familiar to you and you can do some of the problems at the back of the chapters, you can go quickly through the material. But if you need the review (or you need to relearn the material), you can listen to the presentations as many times as you need to.

Read Chapter 1 as an intro to the course. I've posted some videos discussing some of the material

Chapter 1 web presentation notes
An introduction to FIL 440. (8.5 minutes) This presentation gives a quick intro to various topics of financial management.
Some basic discussion of financial markets

Read chapter 4 in the textbook on time value of money and watch the presentation on time value of money. Get comfortable using your financial calculator to solve time value of money problems (or your phone app or Excel) . Practice the major types of basic problems at the back of Chapter 4. If you’d like some more examples (i.e., more fun!), do some of the practice problems at the back of the chapter. The first weekend we will do some applications on the time value of money so this material is critical not just for the entire semester, but also the first weekend. And we use our calculators a lot throughout the course, so please bring them or have members of your group bring Excel.

Chapter 4 web presentation notes
TVM intro
Using financial calculator or Excel to solve a basic TVM problem
TVM examples - practice using financial calculator or Excel
Discounting and annuities
Compounding frequency
Amortized loans
We will do a review exercise the first night on June 24th
Here is the amortization spreadsheet that was used in video presentation.

Review the structure of basic financial statements Chapter 2. Note that while you may be familiar with financial statements, there may be a few differences in some terminology that we will use as a standard in FIL 440. Watch the presentation discussing the basic structure of financial statements. You should at least know the order of items on the balance sheet and the income statement, as well as define each of these items.

Chapter 2 web presentation notes (NOTE: some of these notes are used for a second presentation on cash flows - see "between the 1st and 2nd weekends below)
Structure of balance sheet and income statement

Intro to Chapter 6 looking at risk and return - these presentations review some measurement issues about investments

Chapter 6 web presentation notes
Measuring investment returns
Statistical review. Summarizing return distributions using expected return (average) and standard deviation.
Discussion of risk/return tradeoff in finance

Chapter 7 - We will talk about valuing stocks the first weekend, so I've put together:

*Date*	*Subject / Chapters / Materials*
Before June 24	See above
June 24 & 25 Notes for first weekend	Chapter 1 - Goal of financial management Chapter 4 - Time value of money applications Chapter 6 – Risk, return, and CAPM Chapter 7 – Stock Valuation Chapter 3 – Financial Statement Analysis
Between weekends	Chapter 5 - Bond valuation Chapter 5 notes Bond valuation presentations Chapter 7 – Efficient market hypothesis presentation Chapter 2 - Accounting conventions & cash flow (these notes for this presentation were from Chapter 2 listed above)
July 8 & 9 Notes for second weekend	Exam 1 - Sample Exam and Answers Chapter 2 – Financial measures Chapter 12 – Forecasting Chapter 10 – Capital budgeting rules Chapter 11 – Cash flow estimation
Between weekends
July 22 & 23 Notes for last weekend	Exam 2 Chapter 9 – Cost of capital Chapter 15 – Capital structure Financial risk management A bit of Chapter 17 – Multinational financial management
After last weekend	Individual problem set Capital budgeting case

Welcome to FIL 440!

2011-01-09T06:00:00.000-06:00

Welcome to FIL 440 - Financial Management! On the first day of class, I passed out the course syllabus and Chapter 1 notes.

This website will be used to post announcements made in class and distribute information. Generally, if I have posted anything on the site, I likely would have made some similar announcement in class. If you've temporarily forget any of these classtime announcements, check here first.

This site also allows you to add comments at the end of each posting. Feel free to ask questions about any of the materials available. I'm interested in your feedback on this site.

Other stuff that is available on this site:

Schedule and notes: This page give a rough timetable of what topics we will be covering and when. Please recognize that this schedule is somewhat flexible - I will try to update the schedule if there are changes. Also posted on this schedule are notes for the material to be covered in class - please download the notes before coming to class. Please note that for most chapters in the text, I generally walk through the mini-case at the back of each chapter. These mini-cases are great summaries of each chapter's highlights. If you take a quick glance at the mini-cases, you will get a good idea of the focus of class time.
Study guide/Review: This page has a chapter-by-chapter review which may be helpful as you review for the exam. Each chapter has an outline of topics, a list of terms that you should be familiar with, and suggested problems from the text. As you go through the review sheet, it should jog your memory about each of the topics. The suggested numerical problems are very basic, but should help you recognize key concepts from each chapter.
Blackboard: I will use Blackboard to distribute grades and post the answers to the mini-cases at the back of the chapters (copyright issues).

Early in the class, we will use financial calculators, so try to get your calculator as soon as possible and bring it with you to class (I will be using the TI BAII-Plus and highly recommend that calculator but any financial calculator will do). Please download the notes on the course schedule page (also see link above) before coming to class.

Chapter 15 study guide

2010-11-11T12:44:00.003-06:00

CAPITAL STRUCTURE

Topical review

Differentiate business risk and financial risk

Explain some factors that impact business risk

Discuss the benefits and drawbacks of using debt financing
Work through a recapitalization example
- Estimate cost of equity as debt increases - Hamada equation
- Value the equity as a perpetuity - assuming no growth (like Pizza Palace)
- Evaluate the equilibrium stock price
- Establish the optimal capital structure as maximum share price/minimum WACC
Describe the evolution of capital structure theory
- Modigliani and Miller
  - Assumptions
  - Capital structure irrelevance (MM I)
- Relax MM assumptions
  - Introduction of corporate taxes - value of tax shield
  - Financial distress costs - trade-off theory
  - Signalling/asymmetric information - maintain borrowing capacity
- Other issues
  - Pecking order
  - Managerial discipline - agency costs
Identify important factors that are relevant to capital structure decision (checklist at end of chapter)

Definitions

Basic concepts Business risk, financial risk, optimal capital structure, levered vs. unlevered beta
Theory - trade-off theory, reserve borrowing capacity, pecking order, direct vs. indirect costs of financial distress, signalling, homogeneous expectations, asymmetric information,

Numerical problems from textbook
ST-1, #2/3, 10

Sample midterm

2010-09-27T10:54:00.006-05:00

You have the opportunity to have one full page of notes (8.5" x 11"). Use this page to remind yourself of anything: formulas, definitions, examples, graphs, etc.

To give you a quick idea of the format and level of difficulty for exams, check out this sample midterm from a previous semester. While the topic coverage on this sample exam may be a little different than the subjects that will be on your midterm, there is enough overlap to give you a good feel of what your exam will look like. Your exam will have some multiple choice and two written answer sections - one numerical and the other conceptual. I will try to give you a choice in the written answer section - that is, you will answer something like 2 of the 3 questions, or 3 of 4. Answers to the sample midterm are posted here.

If you'd like to set up an appointment to meet with me to discuss anything as you prepare for the midterm, please don't hesitate to call me or email me.

Chapter 7 study guide

2010-08-24T13:50:00.002-05:00

STOCK VALUATION

Topical review

Discuss the advantages/benefits of owning stock
Define the three important dates related to dividend payments
Value stocks as the PV of future expected dividends – general DDM formula
Find the market capitalization rate of stocks - CAPM (See ch. 6)
Use the Gordon constant growth dividend discount model to value stocks
Segregate total stock returns into dividend and capital gains yields
Understand the assumptions and shortfalls of the constant growth DDM
Use the multi-stage DDM to value stocks whose dividends grow at non-constant rates in the short term
Use market multiples to value stocks that do not pay dividends
Explain the implications of the efficient market hypothesis
Differentiate three forms of the efficient market hypothesis based on the type of information embedded in stock prices

Definitions

Stock definitions: announcement/declaration date, ex-dividend date, payable date, proxy, market equilibrium, efficient market hypothesis, weak/semi-strong/strong form market efficiency
Valuation: intrinsic value, Gordon model, multi-stage DDM, market multiple analysis

Basic numerical problems from the textbook

ST-2, # 2,

Chapter 5 study guide

2010-08-24T09:36:00.014-05:00

BONDS AND BOND VALUATION

Topical review

Always assume bonds pay coupons semi-annually, unless stated otherwise
Illustrate the cash flows of a bond
Price a bond, given a yield to maturity (interest rate) or find a yield, given the price (need financial calculator to solve)
Interpret yield to maturity and its assumptions - set up equation to determine YTM
Draw the shape of a price-yield curve for callable bonds and non-callable bonds
Distinguish between bonds that sell at a discount, at par, and at a premium
Explain the sensitivity of interest rates on bond prices - the effect of maturity (interest rate risk)
Discuss the call provision of bonds and the advantages/disadvantages to issuer/investor
Set up the equation to determine yield-to-call
Show how returns on bonds (returns from coupon income and capital gains) equal YTM in the short term
Discuss the tradeoff between interest rate risk and reinvestment risk for bonds of different maturities
Explain the impact of default risk on required interest rates
Identify the use of bond ratings and their relationship to yields to maturity
Explain differences in nominal interest rates - risk-free rate plus risk premia (r*, IP, DRP, LRP, MP)

Definitions

Bond features: maturity, face value, coupon rate, sinking fund, callable bond, convertible bond, bond rating, reinvestment risk, interest rate risk
Bond types: Treasury bonds, municipal bonds, corporate bonds, floating rate bonds, zero coupon bonds, premium bond, discount bond, investment grade, junk bond
Bond valuation: yield-to-maturity, yield-to-call, current yield, price-yield curve, real rate of interest, inflation premium, default risk premium, liquidity risk premium, maturity premium, yield curve/term structure of interest rates

Basic numerical problems from textbook

# 7, 8, 16

Chapter 13 study guide

2010-08-09T15:02:00.000-05:00

CORPORATE VALUATION

Topical review

Determine the value of a corporation by valuing two components: assets-in-place and nonoperating assets
Use the corporate valuation model determine the value of operations for a company and determine the price per share of outstanding stock

Constant growth and multi-stage

Allocate corporate value to claimholders

Equityholders get the residual

Describe four drivers of corporate value
Define terms and discuss different areas of corporate governance

Composition and election of boards of directors
Provisions protecting a company from takeovers

Definitions

Corporate valuation - assets-in-place, nonoperating assets, free cash flow, market value added, economic value added
Corporate governance - value-based management, poison pills, greenmail, interlocking boards of directors, restricted voting rights

Numerical problems from textbook
ST-1, #1 (to review FCF), 7

Chapter 11 study guide

2010-08-09T09:56:00.005-05:00

ESTIMATING CASH FLOWS FOR CAPITAL BUDGETING

Topical review

Identify and calculate relevant after-tax cash flows from a project
- Initial outlays
- Estimate of depreciation using MACRS (use tables on p. 469) - include shipping and installation
- Operating cash flows (NOPAT, depreciation) - work through mini-income statement
- Investment and changes in working capital
- Terminal cash flows (salvage) including release of WC - potential tax effects of selling fixed assets
Other issues in estimating cash flow
- Incremental free cash flows
- Externalities, such as cannibalization/synergies
- Opportunity and sunk costs
- Ignore interest costs - already accounted for in WACC
Discuss methods that are used to measure stand-alone risk of projects including advantages and disadvantages of the approaches
- Sensitivity analysis - what if one variable changes
- Scenario analysis - vary several inputs to determine best/worst outcomes
- Monte Carlo analysis - let computer generate scenarios
Identify types of real options available in capital budgeting projects when managers can influence the cash flows of a project

Definitions

Components of after-tax cash flows: initial outlay, operating cash flows, terminal cash flows, salvage, depreciation, externalities, cannibalization, synergies, opportunity costs, sunk costs,
Risk analysis: stand-alone risk, corporate risk, market risk, sensitivity analysis, scenario analysis, Monte Carlo analysis
Real options: growth option, abandonment option, timing option, flexibility option

Basic numerical problems from textbook

ST-1, #3, 6

Chapter 12 study guide

2010-08-08T16:51:00.002-05:00

Topical review

Determine sensitivity of balance sheet and income statement items to changes in sales
Compute Additional Funds Needed (AFN)
- Forecast financial statements using percent of sales - project financial statements
- Discuss the effects of financing feedbacks
- Use AFN formula (shortcut) - explain difference in AFN results from pro forma projections
Analyze the effects of operating changes on AFN
- Review financial ratios and other calculations (e.g., FCF, ROIC)
- “What if” questions
Discuss the effects on forecasting balance sheet items under the following conditions:
- Fixed asset capacity
- Lumpy fixed assets
- Economies of scale

Definitions

Pro forma financial statements, AFN, AFN equation, self-supporting growth rate, financing feedbacks
Spontaneous liabilities, payout ratio, retention ratio, capital intensity ratio
Excess capacity, lumpy assets, economies of scale

Basic numerical questions from textbook
#1, 6

Efficient market hypothesis - video

2010-08-08T11:16:00.000-05:00

The risk/return tradeoff in finance

2010-08-08T11:12:00.000-05:00

Expected return and standard deviation - video

2010-08-08T10:56:00.000-05:00

Measuring returns from investments - video

2010-08-08T10:45:00.000-05:00

Structure of financial statements - two part video

2010-07-28T13:27:00.000-05:00

Accounting conventions - two part video

2010-07-28T12:42:00.000-05:00

Chapter 10 study guide

2010-07-28T11:31:00.004-05:00

CAPITAL BUDGETING TECHNIQUES

Topical review

Describe the importance of capital budgeting in a firm
Distinguish independent and mutually exclusive projects as well as normal and non-normal cash flows
Calculate, explain the advantages and disadvantages, and state the decision rules for the following capital budgeting decision rules:
- Payback period
- Discounted payback period
- Net present value (NPV) - use your financial calculators
- Internal rate of return (IRR) - use your financial calculators
- Modified internal rate of return (MIRR)
- (Don't worry about profitability index (PI))
Describe the information provided in a NPV profile - Compare IRR and NPV decisions
Resolve conflicting decisions between IRR and NPV for mutually exclusive projects
- Size disparity - capital rationing
- Unequal lives - equivalent annual annuity (EAA) or replacement chain
- Timing of cash flows - reinvestment assumptions

Definitions

General: Capital budgeting, capital rationing, independent vs. mutually exclusive projects, normal vs. non-normal cash flows
Techniques: net present value (NPV), internal rate of return (IRR), payback period, discounted payback period, modified internal rate of return (MIRR), replacement chain, equivalent annual annuity (EAA), NPV profile

Basic numerical problems from textbook

ST-1 parts a-c (no profitability index), #16 (there are lots of other problems you can practice too)

Chapter 6 study guide

2010-07-26T10:14:00.006-05:00

RISK, RETURN, AND THE CAPITAL ASSET PRICING MODEL

Topical review

Identify and measure two sources of returns from investments – income and capital gains
Use probability distributions to measure expected return and stand-alone risk (standard deviation)

Interpret standard deviation

Explain the concept of risk aversion and how this leads to the risk-return trade-off in finance
Indicate why the concept of risk changes when viewed in a portfolio context (diversification)
Discuss the role of correlation in diversifying portfolios
Distinguish market risk and firm specific risk
Illustrate how diversification reduces firm specific risk
Define the beta of an investment and explain what it measures
Briefly illustrate how the beta of an investment is measured - no actual regressions are necessary
Describe the risk-reward trade-off embedded in CAPM
Use the security market line to determine if an investment is fairly priced - describe the market forces which bring an investment to equilibrium

Definitions

Risk concepts: probability distribution, expected return, stand-alone risk, variance, standard deviation, coefficient of variation, risk aversion, beta, systematic risk (a.k.a., market risk or beta risk), nonsystematic risk (a.k.a., firm specific risk or idiosyncratic risk), correlation, diversification
CAPM: market portfolio, market risk premium, security market line

Basic numerical problems from textbook

4, 7

Chapter 9 study guide

2010-07-13T13:05:00.004-05:00

THE COST OF CAPITAL

Topical review

Explain the uses of WACC, such as capital budgeting and corporate valuation
Explain how to determine the cost of individual components of capital

Should be marginal, after-tax costs
Cost of debt - YTM after-tax
Cost of preferred stock
Cost of equity

Three methods (CAPM, DDM, bond-yield-plus-risk-premium)
CAPM and DDM issues – difficulty in estimating the inputs

Discuss the general effects of floatation costs on costs of capital

Compute the WACC
- Given a specific (target) capital structure
- Always use market value weights - especially for equity
Adjust WACC for risk - CAPM or subjective adjustment
Suggest some ways that firms may lower their WACC

Definitions

Cost of capital - WACC, marginal cost of capital, (after-tax) cost of debt, cost of equity
Flotation costs, target capital structure

Basic numerical problems from textbook

ST-1, 4-6, 16

Chapter 4 study guide

2010-07-07T10:10:00.040-05:00

TIME VALUE OF MONEY

Topical review

Determine PV and FV of simple cash flows, lump sums, annuities, perpetuities, uneven cash flows - USE TIME LINES!
Explain the effects of compounding frequency on EAR-Translate APR to EAR
Calculate mortgage and car payments - identify interest and principal components (of the first one or two payments)

Definitions

Present value and discounting, future value and compounding
Annuities: ordinary (immediate or deferred) annuity, annuity due, perpetuity
Compounding frequency, periodic rate, annual percentage rate (APR), effective (or equivalent) annual rate (EAR), amortized loan

Basic numerical problems from textbook

ST-1, 3, 7, 30 (as well as many others)

Chapter 2 study guide

2010-07-07T09:39:00.005-05:00

FINANCIAL STATEMENTS AND CASH FLOW

Topical review

Explain the basic structure of financial statements
- Balance sheet (A=L+E)
- Income statement (Profit=Rev-Exp)
- Statement of cash flows - sections are operating, investing, and financing
Define and/or interpret each line item of the I/S and B/S
Discuss how accounting policies affect financial statements
- LIFO vs. FIFO inventory accounting - effects on B/S and I/S
- Depreciation acceleration/deceleration – effects on B/S and I/S
- Assets booked at historical cost - ignores intangible assets (e.g., patents, technology, brand name)
Distinguish cash and net income and calculate net cash flow and free cash flow
- Non-cash items such as depreciation
Differentiate different definitions of capital used by a firm: operating, NOWC, total investor supplied capital
Measure and interpret performance with NOPAT, ROIC, EVA, and MVA
Calculate taxes given a tax table
Discuss corporate tax issues such as dividend and interest income/payments

Definitions

Financial statement items: balance sheet and all accounts, income statement and each line, cash flow statement
Financial measures: net operating profit after tax (NOPAT), net cash flow, free cash flow, economic value added (EVA), market value added (MVA), net operating working capital (NOWC), total operating capital
Tax issues: double taxation, marginal tax, average tax

Basic numerical problems from the textbook

#8, 11, 12

FIL 440 Study guide

2010-07-07T09:34:00.019-05:00

Chapter 1 study guide

2010-07-07T09:28:00.004-05:00

INTRODUCTION TO FINANCIAL MANAGEMENT

NOTE: You can just skim sections 1.11 - 1.13 (pp.31-42). These sections are much more investment related.

Topical Review

Describe the differences, advantages, and disadvantages of various forms of business organization (partnership, corporation, etc.)
Define the goal of corporations and criticize/defend this objective
Generally list the major determinants of stockholder value
- Timing of future cash flows (revenue, expenses, required investment)
- Risk of cash flows
- Cost of provided funds
List the items that impact a company's cost of funds
Differentiate primary and secondary market transactions and explain the role of financial intermediaries such as banks

Definitions

Forms of business organization: proprietorship, partnership, corporation, limited liability
Financial markets: primary market, secondary market, direct transfer, financial intermediary, initial public offering, seasoned offering, investment bank

Chapter 3 study guide

2010-07-05T07:48:00.003-05:00

Topical review

Explain the uses and users of financial ratios
Calculate and describe ratios by their objectives
Interpret ratios and provide acceptable arguments for lackluster results
Liquidity

Current ratio
Quick ratio

Asset management
- Inventory turnover
- Days of sales outstanding (DSO), a.k.a. average collection period (ACP)
- Fixed asset turnover
- Total asset turnover
Debt management - explain the benefits and risks of debt
- Debt ratio, debt to equity, asset multiplier
- TIE ratio
Profitability
- (Net) Profit margin
- Basic earning power (BEP)
- Return on assets (ROA)
- Return on (common) equity (ROE)
Market value ratios
- Price/earnings
- Price/cash flow
- Market/book (Price/book)
Systematically organize all ratios through Dupont analysis
Create common size financial statements
Perform percentage change analysis

Basic numerical problems from the textbook

#ST-2a (this one is a "puzzle". You need part (1) to find part (2) and so on. It just practices the definitions a bit and uses a little algebra)
2, 5, 13

Common stock definitions

2010-01-10T08:29:00.000-06:00