Classroom Syllabus MC 556 MANAGEMENT OF FINANCE 3 Credit Hours Effective: May 2009 INSTRUCTOR: PETER FOLK, MBA Adjunct MBA Faculty, Slovakia <peter.folk@ihg.com> TERM: SPRING 2009 COURSE DATES: MAY 23+24, 30+31, JUNE 13+14 CLASS TIMES: 9AM TO 2PM AT CU IN BRATISLAVA REQUIRED RESOURCES Brigham, E.F., & Ehrhardt, M.C. (2008). Financial management: Theory and practice (12th ed.). Mason, Ohio: Thomson, South-Western. Research paper guide. (2004).Trenčín, Slovakia: City University. Available for purchase in the library or online at http://www.vsm.sk/files/sh/rpg2004.pdf Access to a personal computer and the Internet is required. All written assignments must be word-processed. Copyright 2007 - 2009 by City University of Seattle All rights reserved MC 556 MANAGEMENT OF FINANCE This document provides an overview of the course foundation elements, assignments, schedules and activities. For information about general City University policies, please see the City University catalog. If you have additional questions about the course, please contact your instructor. Notification to Students with Disabilities If you are a student with a disability and you require certain help, please contact the site administrator as soon as possible. COURSE DESCRIPTION The course covers further topics in corporate financial management, including analysis of financial statements, financial planning and forecasting, corporate valuation, strategic financing decisions (capital structure decisions, dividends and repurchases), tactical financing decisions (initial public offerings, financial restructuring, lease financing, hybrid financing), working capital management, derivatives and risk management, bankruptcy, reorganization, and liquidation, mergers and LBOs, and multinational financial management. LEARNING GOALS Upon the successful completion of this course, you will be able to: 1. Assess a firm’s financial performance and condition and do financial statement forecasting; 2. Perform corporate valuation; 3. Review the determine the optimal capital structure and understand capital structure theory in more detail; 4. Understand distributions to shareholders, including dividends and repurchases; 5. Understand initial public offerings and financial restructuring 6. Understand other financing decisions including lease financing and hybrid financing (preferred stock, warrants, and convertibles); 7. Perform effective working capital management - including cash, accounts receivable, inventory, short-term investments and short-term financing; 8. Use derivatives to reduce risk; 9. Analyze financial distress and its consequences, reorganization and liquidation in bankruptcy; 10. Analyze the conditions for, process, and results of mergers, leveraged buyouts, and divestitures; 11. Compare and contrast multinational and domestic financial management. MC 556 SYL Page 211 Eff: 05/09 CORE CONCEPTS To achieve the goals of this course, you will need to master the following core concepts: 1. Financial ratio analysis; the Dupont equation; financial statement forecasting; 2. Corporate valuation model; 3. Optimal capital structure and capital structure theory in general; 4. Dividends and repurchases; stock splits and stock dividends; 5. Initial public offerings and financial restructuring; 6. Lease financing; 7. Hybrid financing, including preferred stock, warrants and convertibles; 8. Working capital management; 9. Derivatives and risk management; 10. Bankruptcy, reorganization, and liquidation; 11. Mergers, LBOs, and divestitures; 12. Multinational financial management. ENTRY COMPETENCIES A prerequisite for enrolling in this course is completion of MC 553 (Principles of Finance) or evidence of an equivalent knowledge of finance. RECOMMENDED SUPPLEMENTARY RESOURCES As a City University of Seattle student, you have access to library resources regardless of where and how you are taking this class. To access the resources necessary to complete your coursework, visit the library menu in the My.CityU portal at https://my.cityu.edu, and the CU Slovakia library home page at http://library.cutn.sk/. A good place to begin your research is through the management program resources page in the My.CityU library. It provides links to relevant journals, books, and Web sites. Search the online databases for journal, magazine, and newspaper articles. For additional help, visit the Slovakia library or submit your question in the Contact Us section of the Slovakia library’s web site. ELECTRONIC RESOURCES The following Internet resources may be of use to you in this course. Many other useful Web addresses are provided in the textbook. Please be aware that Web addresses may change from time to time. City University of Seattle http://my.cityu.edu Financial news: MC 556 SYL Page 311 Eff: 05/09 http://finance.yahoo.com http://www.thestreet.com http://money.cnn.com Journal of Finance http://www.cob.ohio-state.edu/dept/fin/journal/jof.htm The Wall Street Journal Online http://www.wsj.com United States Securities and Exchange Commission (includes EDGAR database of company annual reports) http://www.sec.gov/index.html Wall Street Research Net http://www.wsrn.com OVERVIEW OF COURSE ACTIVITIES AND GRADING The grade you receive for the course will be derived using City University’s decimal grading system, based on the following: Assignments Case Study Financial News Analysis - Presentation Final Examination 30% 30% 40% TOTAL 100% Please see the current City University catalog or consult your instructor for guidance in determining your decimal grade. EXPLANATION OF ASSIGNMENTS AND GRADING CASE STUDY Your instructor will provide this graded case assignment. You should treat it as a problem presented to you by your company’s top management for analysis and decision recommendations. Hence, your paper should demonstrate the qualities of thorough and relevant research, logically sound analysis, and focused professional writing. For each question about the case, clearly indicate which question you are answering, and show all computations (where applicable) to support your conclusions. Where assumptions must be made, state and justify them clearly. Your instructor may also give you some guidance on the assumptions you should make. Grading Criteria for Case Study Demonstrated understanding of relevant course concepts Clarity of explanations Completeness and accuracy of calculations Logically supported conclusions MC 556 SYL Page 411 20% 20% 20% 25% Eff: 05/09 Professional presentation (including language and format) 15% TOTAL 100% FINANCIAL NEWS ANALYSIS This assignment is designed to (a) stimulate you to find out what is happening in the financial world today by reading current newspapers and magazines, (b) help you to learn the course material by seeing how it applies to real companies, events, and situations, and (c) challenge you to analyze and evaluate financial news so that you can form your own opinions. Steps: 1. Go to your local library or visit the City University on-line library and review recent issues (published within the past 30 days) of the following periodicals: (a) The Wall Street Journal or (b) Business Week magazine. (Articles from these sources’ websites are permissible, but they may require subscription to access the articles on-line.). Look for news articles that (a) related to topics covered by the MC556 course and (b) raise interesting issues about company financial management. Try to find an article that will help you do well on the trading criteria for the assignment (listed below). Check with the instructor to make sure that an article you found is appropriate. 2. Prepare a brief summary of your findings and present it to the class. It should take you no more than 10-15 minutes to present your conclusions. Visual materials are required Microsoft PowerPoint presentation is strongly recommended. You will be expected to turn your presentation in. The format is to be appropriate for a Board of Directors or a venture capitalist. Additional criteria will be provided by the instructor, but your presentation should primarily: Explain the news item (the event and why the newspaper or magazine thought it was newsworthy) Give some facts about the companies and people involved (you may have to do some further research beyond the news article itself) Explain the connection between the news article and the MC 556 course Identify key actions or decisions described in the news item and evaluate them, giving your own opinions and your reasons 3. You must have a photocopy of the original news items, showing the date of publication available at the time of presentation. Grading Criteria for Financial News Presentation Choice of news article (relevance, importance, interest) Clarity of explanation of the news item Explanation of the connection to the course material Analysis and evaluation of the issues relating to financial management Professional demeanor Capacity to handle questions and feedback Grammar, spelling, punctuation, and clarity of visual materials 20% 15% 10% 20% 15% 10% 10% TOTAL 100% MC 556 SYL Page 511 Eff: 05/09 ADDITIONAL REQUIREMENTS FOR ASSIGNMENTS HOMEWORK ASSIGNMENTS To achieve the learning objectives of this course, you will need to understand key concepts and also to be able to perform calculations to solve certain types of financial problems. It is very important to do homework outside of class, even though the assignments are not graded. An effective strategy would be: 1. For each week of the course, start by reading the assigned chapters of the textbook. Test your basic understanding of the concepts by reading each chapter summary. 2. Answer the practice questions and problems listed as homework in the recommended course schedule. 3. Use the online study guide and other learning resources on the textbook website to enhance and further test your understanding. Solutions to the practice questions and problems for homework are provided. However, you will learn best if you first attempt to answer them on your own before checking the solutions. For additional practice, do more problems of the same type. PROFESSIONAL PRESENTATION OF WRITTEN WORK All assignments submitted for this course should be of professional quality. The student should present each paper in a format that would be appropriate for submitting to upper management. This course requires that you use the American Psychological Association (APA) style in preparing any written work where other sources are used. A recommended style guide is included in the “Required Text and Materials” section. Refer to this style guide for proper format, referencing methods, and bibliographic format. References should be cited for all facts, ideas, conclusions, and opinions not your own. A proper title page should preface all written assignments, unless otherwise required. The title page should include: your name, the title of the paper, the name and number of the course, the date submitted, and the name of the instructor. Your instructor may prefer you to submit your written assignments electronically. Hard copies of your work should be typed or word-processed on white 8½ by 11 inch paper and double spaced. Some assignments may require that your work be prepared on a computer spreadsheet. When submitting hard copies, do not use binders or special covers. Staple your completed assignments in the upper-left hand corner. Your instructor may have different or additional requirements for the submission of written work. EXAMINATIONS Examinations are closed book. You will be allowed to use one A4 page of notes in your own handwriting. Both sides of the page may be used. The page of notes must be turned in with your exam. You should have a financial calculator during exams. MC 556 SYL Page 611 Eff: 05/09 The exam is three hours. You should be prepared to answer or solve multiple choice questions (conceptual and computational), short answer questions and longer essay questions, and problems. Your instructor will provide additional information about exam format and grading criteria. Grading criteria will be based on the learning objectives of the course. When writing the exams, you should present all computations and label them clearly. For both problems and computational multiple-choice questions, partial credit may be earned based on well-labeled computations, even if the final answer is not correct. All work must be done on the exam pages provided unless your instructor requires that you write your answers on separate answer sheets. Test questions and answer sheets must be submitted to the proctor. SCHOLASTIC HONESTY City University of Seattle expects each student to do his/her own work. The University has "zero tolerance" for cheating, plagiarism, unauthorized collaboration on assignments and papers, using "notes" during exams, submitting someone else's work as one's own, submitting work previously submitted for another course, or facilitating acts of academic dishonesty by others. The penalties are severe! A first offense can result in a zero grade for the course and suspension for one quarter; a second offense can result in a zero grade for the course and suspension for two or more quarters; a third offense can result in expulsion from the University. The Policy and Procedures may be found at http://www.vsm.sk/en/students/scholastic-honesty/policies-and-procedures/. In addition to providing your work to the instructor for grading, you must also submit an electronic copy for the CU archives (unless the work is specifically exempted by the instructor). You will not receive a grade for particular work until and unless you submit this electronic copy. The procedure for submitting work to the archives is to upload it via the website http://www.vsm.sk/en/students/on-line-center/uploader/uploader.html. Files should include the cover page of the work with the student name, instructor name, course name and number, and date. File names should indicate the type of assignment, such as “researchpaper.doc”, “casestudy.doc” or “thesis.doc” (student name should not be a part of the file name because the system adds it). All files received into the archives are submitted to www.TurnItIn.com for plagiarism checking. RECOMMENDED COURSE SCHEDULE The schedule of course activities and assignments is given below. If you find you are unable to complete the assignments as scheduled, contact your instructor. Your instructor may elect to adjust the outline to meet the unique needs of the class. Homework abbreviations: Q = Questions; ST = Self-Test Problems; P = Problems SESSION 1 May 23rd READINGS & HOMEWORK TOPICS AND ASSIGNMENTS Course Introduction Financial Planning and Forecasting Financial Statements Chapter 14 Q 14-1; P 14-5; P 14-9 Corporate Valuation, Value-Based Management, and Corporate Governance Chapter 15 Q 15-1; P 15-1; P 15-2; P 15-4 ; P 15-6 ; P 15-7 MC 556 SYL Page 711 Eff: 05/09 2 Capital Structure Decisions: The Basics Chapter 16 Q 16-1; ST-1; P 16-2; P 16-4; P 16-5; P 16-7; P 16-10 Capital Structure Decisions: Extensions Chapter 17 Q 17-1; ST-1; P 17-4 ; P 17-5; P 17-6; P 17-7 ; P 17-10 Distribution to Shareholders: Dividends and Repurchases Chapter 18 Q 18-1; Q 18-2; P 18-1; P 18-5 ; P 18-6 ; P 18-10 Initial Public Offerings, Investment Banking and Financial Restructuring Chapter 19 Q 19-1; P 19-1; P 19-2; P 19-3 ; P 19-4 Lease financing Chapter 20 Q 20-1; Q 20-5 ; P 20-1; P 20-2; P 20-4 Hybrid Financing: Preferred Stock, Warrants, and Convertibles Chapter 21 Q 21-1; Q 21-2; Q 21-4; P 21-1; P 21-2; P 21-3 ; P 21-4 ; P 21-5 TOPICS AND ASSIGNMENTS READINGS & HOMEWORK Working Capital Management Chapter 22 Q 22-1; P 22-1; P 22-6; P 22-8; P 22-11; P 22-13; P 22-14; P 2216; P 22-17 Derivatives and Risk Management Chapter 23 Q 23-1; ST-1; P 23-3; P 23-4; P 23-5 Bankruptcy, Reorganization, and Liquidation Chapter 24 Q 24-1; Q 24-2; P 24-1 ; P 24-2 Mergers, LBOs, Divestitures, and Holding Companies Chapter 25 Q 25-1; P 25-1; P 25-2; P 25-3; P 25-4; P 25-5 Multinational Financial Management Chapter 26 Q 26-1; P 26-2; P 26-3; P 26-9; P 26-11 ; P 26-13 ; P 26-14 May 24th 3 May 30th SESSION 4 May 31st 5 Jun 13th MC 556 SYL Page 811 Eff: 05/09 6 Catch-up and Integration Jun 14th Oral Presentations – Financial News Analysis Friday, Final Examination (Chapters 14- 26) Jun 19th Due: Case Study MC 556 SYL Page 911 Eff: 05/09