Course Title: Corporate Credit
Centennial College
Course Code: FINA 341
COURSE OUTLINE
SCHOOL:
School of Business
DEPARTMENT:
Accounting
PROGRAM (if applicable):
Financial Services
COURSE TITLE:
Corporate Credit
COURSE CODE:
FINA 341
TOTAL COURSE HOURS:
60
PRE-REQUISITES/CO-REQUISITES:
ACCT-112 - Financial Accounting
1
MATH-106 - Mathematics of
Finance
COURSE ELIGIBILITY FOR PRIOR LEARNING
ASSESSMENT AND RECOGNITION (PLAR):
ORIGINATED BY:
Harvey Willows
REVISED BY:
Harvey Willows
DATE:
September, 2008
Eligible
APPROVED BY:
Chair/Dean
It is the responsibility of students to retain all course outlines for the purpose of applying for transfer of credit to
other educational institutions. A fee may be charged for further copies.
Course Title: Corporate Credit
Centennial College
Course Code: FINA 341
Course Information and Description:
This course is part of the curriculum for the full-time Financial Services program.
The course examines topics related to the financial management of organizations. Instructional
methods include lectures, class discussion and problem solving. Specific topics covered are:
the goals and functions of financial management, financial forecasting, operating and financial
leverage, working capital and the financing decision, current asset management, sources of
short-term financing, valuation and rates of return, cost of capital, the capital budgeting
decision, and risk and capital budgeting.
Course Learning Outcomes:
Upon successful completion of this course, the student will have demonstrated the ability to:
1.
2.
3.
4.
5.
Identify how finance builds on the disciplines of accounting and economics.
Discuss the analytical decision-making nature of finance within a risk-return framework.
Describe the primary goal of finance as the maximization of shareholder wealth.
Identify possible conflicting goals of finance such as social goals or management interests.
Outline the activities of financial managers that are primarily based on the raising and investing of
funds in an efficient manner.
6. Identify some domestic and international economic conditions that the financial manger should
consider.
7. Identify the role of financial markets in allocating capital.
8. Explain why financial forecasting is essential for the healthy growth of the firm.
9. Prepare the 3 financial statements for forecasting - the pro forma income statement, the pro forma
cash budget, and the pro forma balance sheet.
10. Perform the percent-of-sales method forecasting on a less precise basis.
11. Determine the need for new funding resulting from sales growth.
12. Define advantage as a method to magnify earnings available to the firm's common shareholders.
13. Define and calculate operating leverage and assess its opportunities and limitations.
14. Define and calculate financial leverage and assess its opportunities and limitations.
15. Calculate the EBIT/EPS indifference point.
16. Define and calculate combined leverage.
17. Define working capital management as the financing and controlling of current assets of the firm.
18. Describe the nature of asset growth and explain those current assets that are more permanent in
nature.
19. Explain that the matching of sales and production may not be efficient in the short run and will likely
result in the buildup of current assets.
20. Explain financing of assets in terms of hedging.
21. Describe the term structure of interest rates and explain the theories that explain its shape. Also,
discuss the value of the term structure to a financial manager.
22. Identify risk and profitability in determining the financing plan for current assets.
23. Outline current asset management as an extension of Chapter 6 concepts and recognize that a
firm's investment in current assets should achieve an acceptable return.
24. Discuss cash management as the control of receipts and disbursements to minimize nonearning
cash balances and describe techniques to make cash management more efficient.
25. Define the various marketable securities available to the firm and calculate the yield on these
instruments.
Course Title: Corporate Credit
Centennial College
Course Code: FINA 341
26. Describe accounts receivable as an investment based on the firm's credit policies, outline the
considerations in granting credit, and evaluate a credit decision that changes credit terms to
stimulate sales.
27. Describe inventory as an investment and apply techniques to reduce the cost of this investment.
28. Explain the concept that the less liquid the asset, the higher the expected return.
29. Describe trade credit as an important form of short-term financing and calculate the cost to the firm
if a discount is forgone.
30. Describe bank loans as self-liquidating, as short-term, and as having their interest cost tied to the
prime rate. Also, calculate interest rates under differing conditions.
31. Describe commercial paper as a short-term, unsecured promissory note of the firm.
32. Review borrowing in foreign markets as a cost-effective alternative for the firm.
33. Explain that offering accounts receivable and inventory as collateral may lower the interest costs on
a loan.
34. Demonstrate the hedging of interest rates to reduce borrowing risk.
35. Describe the valuation of a financial asset as based on the present value of future cash flows.
36. Explain that the required rate of return in valuing an asset is bases on the risk involved.
37. Calculate the current value of bonds, preferred shares and common shares based on future
benefits or cash flows.
38. Calculate the yields on financial claims based on the relationship between current price and future
expected cash flows.
39. Describe the use of a price-earnings ratio to determine value.
40. Explain that the cost of capital represents the overall cost of financing to the firm.
41. Define the cost of capital as the discount rate normally used to analyze an investment. It is an
evaluation tool.
42. Calculate the cost of capital based on the various valuation techniques from Chapter 10 as applied
to bonds, preferred shares, and common shares.
43. Describe how a firm attempts to find a minimum cost of capital by varying the mix of its sources of
financing.
44. Explain the marginal cost of capital concept.
45. Define capital budgeting decisions as long-run investment decisions.
46. Explain that cash flows rather than accounting earnings are evaluated in the capital budgeting
decision.
47. Evaluate investments by the average accounting return, the payback method, the internal rate of
return, the net present value, and the profitability index.
48. Discuss the use of the cost of capital as the discount rate in capital budgeting analysis.
49. Identify the resultant cash flows that result from an investment decision, including the after-tax
operating benefits, and the tax shield benefits of capital cost allowance (amortization).
50. Perform NPV analysis to assist in the decision-making concerning long-run investments.
51. Describe the concept of risk based on the uncertainty of future cash flows.
52. Define risk as standard deviation, coefficient of variation, or beta.
53. Describe most investors as risk averse.
54. Use the basic methodology of risk-adjusted discount rates for dealing with risk in capital budgeting
analysis.
55. Describe and apply the techniques of certainty equivalents, simulation models, sensitivity analysis,
and decision trees to help assess risk.
56. Discuss how a project's risk may be considered in a portfolio context.
Essential Employability Skills:
Course Title: Corporate Credit
Centennial College
Course Code: FINA 341
This course supports the students’ ability to:
ƒ communicate clearly, concisely and correctly in the written, spoken, and visual form that
fulfills the purpose and meets the needs of the audience.
ƒ respond to written, spoken, or visual messages in a manner that ensures effective
communication.
ƒ execute mathematical operations accurately.
ƒ apply a systematic approach to solve problems.
ƒ use a variety of thinking skills to anticipate and solve problems.
ƒ locate, select, organize, and document information using appropriate technology and
information systems.
ƒ analyze, evaluate, and apply relevant information from a variety of sources.
ƒ show respect for the diverse opinions, values, belief systems, and contributions of
others.
ƒ interact with others in groups or teams in ways that contribute to effective working
relationships and the achievement of goals.
ƒ manage the use of time and other resources to complete projects.
ƒ take responsibility for one’s own actions, decisions, and consequences.
Prior Learning Assessment And Recognition Process(es):
This course is eligible for prior learning assessment:
The challenge process is as follows:
(1)
(2)
(3)
Interview to inform candidate about (2) and (3) below.
Oral Exam.
2.5 hour written exam if successful in (2).
Policies:
Statement of Accommodation:
All students and employees have the right to study and work in an environment that is free
from discrimination and/or harassment. It is College Policy to provide accommodation based
on grounds defined in the Ontario Human Rights Code. Accommodation may include changes
or modifications to standard practices.
Students requiring accommodation based on Human Rights grounds should talk with their
teacher(s) as soon as possible. Details are available at the Information Centre at each
campus.
Course Title: Corporate Credit
Centennial College
Course Code: FINA 341
Faculty Consultation:
Teachers are available to see students outside of class time and students can contact
teachers via voice mail, email or through their department office. Information regarding how to
contact teachers will be provided at the beginning of the course and is also available in the
department office.
Other Policies:
Students should be familiar with the College Policy on Dispute Resolution which covers
students’ rights, responsibilities and the Academic Appeal process. For further information
consult the Academic Matters Section in the full-time and continuing education calendars. The
Academic Appeal Application form is available from any enrolment services office.
Human Rights
It is the policy of the College that all programs will strive for a learning teaching and work
environment that promotes inclusion, understanding and respect for all students and
employees, consistent with the Ontario Human Rights Code and the College’s Dispute
Resolution Policy and Procedures.
Course Policies:
A student who misses a test or fails to submit an assignment on the due date will receive a
grade of “U” on that portion of the course. The instructor may administer additional evaluations
to ensure that the final course grade fully reflects the student’s achievement.
The policy relating to academic dishonesty as outlined in the students rights and
responsibilities code of conduct and procedures will be fully enforced.
PROBATIONARY POLICY:
A revised probationary policy is in place. Please contact your academic department for details.
Use of Dictionaries
Students are permitted to use a bilingual paper dictionary during tests and exams. The
invigilator reserves the right to examine the dictionary for any supplemental notations.
Final Examination Policies
Centennial College
Course Title: Corporate Credit
Course Code: FINA 341
Students are obliged to produce official photo identification at any time during the semester
when requested to do so by any professor. The official piece for full-time students is the
Centennial Student Card. Continuing Education students do not have Centennial Student
Cards, and so may use other forms of photo identification, such as a driver’s license.
Students must put their official photo-ID cards (or other photo ID, in the case of CE students) in
full view when writing a test or examination, whether in the classroom or in the gym. Full-time
students who do not have official photo-ID will be permitted to write the examination with a
substitute photo-ID but they will be required to produce a photo-ID within 24 hours or
examination results will be void.
Evaluation and Grading Systems:
Assignment & Quizzes
Lyryx Assessment Labs
Mid-Term Test
Comprehensive Final Exam
Total
10%
20% (or you could go with 15%..)
30%
40%
100%
Final examinations should be retained for one year by the College; however, it is college policy
to make final examination papers available to students for review on request.
Text and Other Instructional/ Learning Materials:
FOUNDATIONS OF FINANCIAL MANAGEMENT, Seventh Canadian Edition, Block, Hirt,
Short. McGraw Hill Publishers. Packaged with Lyryx Assessment for Finance.
** Please ensure you purchase the correct package that includes Lyryx.
ISBN: 007-078-2539
** If you already have at text, or purchase a text without the Lyryx pin code, you can purchase
it online for $39.95 at http://login.lyryx.com
REFERENCE:
Study Guide to accompany text above.
About Lyryx (pronounced “lyrics”)
Lyryx is an online resource that contains interactive assessment tools for students in the form
or Lyryx “Labs”. The work that you do in the Lyryx Labs is worth 20% of your final mark.
Students can complete each question in the Labs as many times as they want between the
start date and the due date and only their best mark will be kept. Students are encouraged to
Course Title: Corporate Credit
Centennial College
Course Code: FINA 341
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Course Title: Corporate Credit
Centennial College
Course Code: FINA 341
Week
Topic/Content
Readings
Instructional Objectives
Instructional Strategies/
Tests and Assignments
1AB
The Goals and Functions of
Financial Management
Financial Forecasting
Chapter 1
See Learning Outcomes 1-7
Chapter 4
See Learning Outcomes 8-11
Chapter 5
See Learning Outcomes 12-16
Chapter 6
See Learning Outcomes17-22
6B/7AB
Operating and Financial
Leverage
Working Capital and the
Financing Decision
Current Asset Management
Chapter 7
See Learning Outcomes 23-28
8A
Midterm Test
8B/9AB
Sources of Short-Term
Financing
Valuation and Rates of
Return
Cost of Capital
Chapters
1,4,5,6,7
Chapter 8
Selected Discussion Questions
Lyryx Lab 1
Selected Problems
Lyryx Lab 2
Selected Problems
Lyryx Lab 3
Selected Problems
Lyryx Lab 4
Selected Problems
Lyryx Lab 5
This test is worth 30% of your final grade
See Learning Outcomes 29-34
Chapter 10
See Learning Outcomes 35-39
Chapter 11
See Learning Outcomes 40-44
Chapter 12
See Learning Outcomes 45-50
Chapter 13
See Learning Outcomes 51-56
2AB/3A
3B/4AB
5AB/6A
10AB/11A
11B/12AB
13AB
14AB
15
The Capital Budgeting
Decision
Risk and Capital Budgeting
Comprehensive Final
Exam
Selected Problems
Lyryx Lab 6
Selected Problems
Lyryx Lab 7
Selected Problems
Lyryx Lab 8
Selected Problems
Lyryx Lab 9
Selected Problems
Lyryx Lab 10
This exam is worth 40% of your final grade