Let’s Discuss: Preparing for the Midterm ExamIn preparation for taking your midterm exam, please consider all of the materials you have covered in this course during modules 1 – 3 (i.e. discussion questions, text readings, homework assignments, quizzes, projects, etc). Post at least 1 question that you are unclear of and would like to receive feedback from your instructor or your peers. If you have no questions, please tell us about a topic that has been most interesting to you or most relevant to your field. If you are going to ask a question, it must be in the form of an essay. The essay must be 300 words minimum.Module 1
Introduction to Finance
In this first chapter, we will learn about modern corporate
finance and financial management. We will study the role and
goal of the financial manager in corporations. Additionally, it is
important to understand different types of corporate
organizations with their advantages and disadvantages.
More specifically, after studying this chapter you should be able
to explain:
The basic types of financial management decisions and the role of the
financial manager
The goal of financial management
The financial implications of the different forms of business organization
The conflicts of interest that can arise between managers and owners
We will continue our study of Corporate Finance in this module in preparation for the
quiz that will cover both Chapters 1 and 2. We will learn about financial statements,
taxes, and cash flow. We will not emphasize preparing financial statements; instead we
will look at financial statements as a key source of information to help us make
decisions.
Chapter 2 establishes the basis for our study of Financial Statements, Taxes and Cash
Flow. We will learn that the interconnections of the different management activities that
can be seen through careful study of the financial statements. We utilize ratios to
evaluate the relationships and measure the changes in the financial statements. You
will see how preparing the financial statements for tax purposes are much different than
preparing the statements for our shareholders.
More specifically, after studying this chapter you should be able to describe:
The difference between accounting value (or book? value) and market
value.
The difference between accounting income and cash flow
The difference between average and marginal tax rates
How to determine a firm’s cash flow from its financial statements.
Module 2
Working with Financial Statements
In Chapter 3, we will learn about the tools we apply to financial
statements to help us understand how a company runs. We will
learn how to look at financial statements and understand the
elements of each of the three major statements (income
statement, balance sheet and cash flow statement) and the
relationships within those statements.
Why do we need this information? Simple, financial statements
represent the language of business. We use these to communicate to government
agencies, investors and internally to other managers. Let’s learn the language of
business….
More specifically, after studying this chapter you should be able to explain:
The basic types of ratios used in financial statement analysis (FSA)
The measures used by organizations to gage efficiency
The methodology of common-sizing statements and reading a financial
statement
In Chapter 4, we learn what is financial planning in the corporate sense and which
models are used in managing the finances of a company. We will learn the answers to
these questions as well as how external financing leads to growth of a company. These
are the essential tools and missions of managers in a corporation and either as an
employee or an investor we all need to understand these items.
Chapter 4 helps us understand how to prepare and utilize pro forma statements, sales
forecasts, asset requirements, use economic assumptions and put these all together in
models to aid in managing a company or understanding if a company is managed
properly. We will understand what financial planning can accomplish in the business
environment.
More specifically, after studying this chapter you should be able to describe:
The mission of management in the financial planning process.
The tools at our disposal to plan and manage a company.
The manner in which budgets are developed for sales and asset needs
assessments.
How to determine a firm’s cash flow from its financial statements.
Module 3
The Time Value of Money and Discounted Cash Flow
Valuation
In chapter5 , we will learn about the concepts of present value,
future value and discounting cash flows. These concepts form
the basis for every concept going forward In this course and in
higher level financial courses. TVM estimates impact our
business decisions and calculations but perhaps more
importantly impact our mortgage, loan and retirement
calculations. More specifically, after studying this chapter you
should be able to explain:
The basic PV and FV calculations.
How to apply these calculations in establishing value and management
decisions.
The methodology of discounted cash flow.
Why is money today worth more than money tomorrow and how does this concept
translate into a method we can use to help judge our decisions and manage our
businesses? These are the questions we will seek an answer to in this chapter and
reinforce with the quiz at the end.
Chapter 6 helps us understand how to use the DCF method to establish valuation
techniques that are widely applied in our business and personal lives. We will
understand what these calculations measure and how they influence our concepts of
risk and return in finance.
More specifically, after studying this chapter you should be able to describe:
The Discounted Cash Flow methodology.
The difference between interest rates and different compounding
methods.
The concepts of present value and future value as well as discounting.
How to determine a firm’s cash flow in the context of required rates of
return and compensation for risk.
Module 4
Review for the Midterm & Interest Rates and Bond
Valuation
Midterm Review
The topical coverage for the Midterm examination will include:
terms from chapters 1 through 6, understanding the nature of
the financial management work scope, able to show the
difference between book value and market value and knowing
the determinants of a firm’s ability to grow. To prepare for the
Midterm examination, you will need to thoroughly review the
above mentioned concepts.
The midterm exam comprises multiple choice questions and essays questions covering
chapters 1-6. There are two sections to the exam; make sure you complete both
sections. You have two hours to complete the exam (both portions) once you begin.
Interest Rates and Bond Valuation
In this module, we will apply the concepts of present value, future value and discounting
cash flows to bond valuation and pricing. Bonds are a form of debt that are issued by
corporations, the federal government, the municipal governments and foreign
governments. Bonds are priced according to these concepts of time value of money and
in particular the impact of interest rates as established by the federal government and
credit agencies impact bond values greatly.
More specifically, after studying this topic you should be able to explain:
How a bond is priced.
How to apply the calculations of DCF in pricing bonds.
Learn about interest rates and understand.
Understand the different types of bonds.
Distinguish between a par bond, a discount bond and a premium bond.
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