IB9EM-15 Corporate Financial Management
Introductory description
The general purpose of this module is to provide students with MSc level knowledge of concepts and issues in Corporate Financial Management that enables them to solve general problems in the field.
Module aims
To provide students with MSc level knowledge of concepts and issues in Corporate Financial Management that enables them to solve general problems in the field. The goal is that students get equipped to apply state of the art ideas of modern Corporate Financial Management theory as well as the quantitative tools to solving the types of problems faced by CFOs and other business executives who must make investment, financing, risk management and payout decisions taking account of flexibility and discretion under uncertainty, tax consequences, and financing effects. Students will also be able to trace the effects of considerations such as corporate and personal taxes, bankruptcy costs, information signaling and conflicts of interest on investment decisions and on financial structure decisions. Finally, students will understand the use of optionpricing techniques in corporate finance to evaluate corporate securities and investment projects. NOTE: This module has been developed alongside IB9Y7 Corporate Finance (the MSF version of this module). In the past they were taught together, however in recent years CFM has been developed as a somewhat lighter and slower-paced module to reflect the fact that the FE and AF students have a slightly less strong finance background.
Outline syllabus
This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.
Valuation.
Financing and capital structure.
Capital structure and frictions.
Capital structure and incentives: financial contracting.
Capital budgeting: foundations.
Capital budgeting: extensions.
Corporate risk management.
Payout policy and cash management.
Corporate governance.
Learning outcomes
By the end of the module, students should be able to:
- Discuss the implication of capital structure and capital budgeting theory in on different aspects of real world project appraisal.
- Explain the financial market activities that are related to payout and agency issues.
- Apply the corporate finance models to interpret the real world phenomena.
- Recognize the quantitative modelling techniques of corporate financial management.
- Define the basic principle of capital structure theory, capital budgeting, agency, payout policy, and risk management.
Indicative reading list
The core reading for this module consists of selected chapters from:
Berk, J., and P. DeMarzo “Corporate Finance,” 4th (global) edition, Pearson.
For a lower level preparatory reading (for those who feel they have weaker background in undergratuate level financial management):
Hillier, D., S. Ross, R. Westerfield, J. Jaffe, and B. Jordan “Corporate Finance,” 2nd (European) edition, McGraw Hill.
Subject specific skills
Evaluate business decisions by using financial techniques, including basic modeling of uncertainty, Net Present Value method and discount cash flow methods.
Discuss the key issues involved in capital budgeting decisions in the presence of taxes, and financing frictions.
Describe models of capital structure and payout policy in the presence of market imperfections (e.g. taxes).
Describe corporate risk management issues and tools.
Identify and understand key characteristics of corporate financial decisions in the market from the financial press.
Use models to appraise investment projects, financing methods, and the impact of payout/retention decisions and cash management.
Transferable skills
Written skills.
Problem solving.
Study time
| Type | Required |
|---|---|
| Lectures | 10 sessions of 2 hours (13%) |
| Seminars | 9 sessions of 1 hour (6%) |
| Private study | 121 hours (81%) |
| Total | 150 hours |
Private study description
Self study to include assessment preparation and pre-reading for lectures
Costs
No further costs have been identified for this module.
You do not need to pass all assessment components to pass the module.
Assessment group D
| Weighting | Study time | Eligible for self-certification | |
|---|---|---|---|
Assessment component |
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| Class Test | 25% | No | |
Reassessment component is the same |
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Assessment component |
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| Written Examination - Local | 75% | No | |
Reassessment component is the same |
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Courses
This module is Core for:
- Year 1 of TIBS-LN1J Postgraduate Taught Finance and Economics
This module is Core optional for:
- Year 1 of TIBS-N4N3 MSc in Accounting and Finance