ACE 340
Financial Management
FALL 2006 ED-2, MWF 12-12:50
Instructor: Dr. Bruce J. Sherrick
TA: Al Umarov
Office: 306 Mumford Hall
Hours: F 1-2 or announced
Phone: 244-2637
Office: 304 Mumford
E-mail: sherrick@uiuc.edu
Hours: M, W: 1-2:00 or by appt.
Admin. Assistant: Melissa Warmbier, 332 Mumford, ph:(333-0737), e-mail: mwarmbie@uiuc.edu
SYLLABUS
Overview and Purpose of Course:
This course is an introduction to financial analysis and management as applied to both firms and
individuals. The overall purpose of the course is to become better able to make effective financial
decisions. These decisions include and impact: your own financial condition, the financial
performance of firms, investment analyses, financial statement preparation and interpretation,
financial contracting (borrowing/lending), and performance evaluation. Hence, the coverage of
subject matter will be broad enough to capture the "big picture", but detailed enough to provide
useful tools to deal with many of the types of problems you will encounter in the future. The
course is in transition toward a curriculum that supports preparation for the CFP as well as
financial lending services industries -- and your own financial management.
Content: (see accompanying hanout)
The topics included are: financial statement preparation and analysis; capital structure (debt and
equity); investment analysis and portfolio theory; time value of money; interest rates and term
structure; asset markets (pricing theories); evaluation of financial risk and insurance exposures;
credit markets and financial capital suppliers. In addition, there is a class project that requires that
you undertake a visit with either a lender, or a professional practicing in the financial
analysis/advisor sector and write a brief description about the experience and what was learned.
Organization:
The class organization is lecture and discussion. The classroom must also be viewed as an open
forum at which new ideas and questions are to be presented. High levels of participation will help
shape the course to be of greatest value even though the class size is relatively large. Those who
have registered for audit are expected to participate at an equally intelligent level. We will
generally meet three times per week, but occasionally the Friday session will be used for review,
to work on problems, or for pop quizzes, or used for your own work. Attendance is important -please notify me in advance if you must miss a session. Your participation is also crucial for
pacing the presentations and your active engagement in class is therefore needed.
Some computerized materials will be provided in class, others via the web and still others may be
distributed by e-mail as attachments. It is your responsibility to maintain your own class filing
system and for managing the information flow. It has worked well in the past for students to keep
a “paper-trail” of all class materials in a chronologically arranged folder, from all sources (class,
web, and e-mail attachments) and a virtual record on their own computer. Given the large number
of assignments, sample forms, and computer files that will be distributed, it is important to
1
develop your own system early, and to maintain it diligently throughout the semester. There will
be frequent homework assignments (8-10 total) that parallel the course materials to reinforce
concepts and to identify weaknesses in lecture coverage and student comprehension. There will
be two midterms and a cumulative final. If interested, we will have review sessions prior to each
exam. There will also be 2-4 quizzes given as deemed useful for reinforcing the materials and
preparing for exams. They will generally be announced one class prior, but will not be indicated
on the class web site or calendar.
The class website (http://www.ace.uiuc.edu/classes/ACE340) will generally be used to archive all
class materials and to distribute useful information such as computerized tools, copies of
assignments, tests, quizzes, and their keys. I will generally place the lecture materials on the web
shortly after each class, but the web-versions are often somewhat less complete than the materials
you get from class. Additionally, we will utilize several of the Excel-based tools contained in the
suite of FAST programs (Financial Analysis Solution Tools). Most of the programs can be
downloaded from the farmdoc website, or you can purchase a copy of the FAST CD for $10,
(available around Sept. 15th).
Required Materials and Attitude:
Text:
The majority of the course notes will be distributed in class and via the class
website including a packet on Time Value of Money and Capital Budgeting
Applications.
In addition, you will need a reference text that contains a complementary set of
presentation on financial statement preparation and analysis, time value of money,
portfolio theory, term structure of interest rates, and credit evaluation. A
particularly good applied finance text that satisfies these purposes is: Barry,
Ellinger, Hopkin, & Baker (BEHB). Financial Management in Agriculture, 6th ed.,
Interstate Publishers – (very good reference book to have long term). Another
good reference is a text in the Keown et. al series, Foundations of Finance
(Prentice Hall, 6th edition or newer)
Computer:
Access to a computer with (i) decent internet connection and (ii) a recent version
of Excel is essential. Many of the assignments will require you to build the
answers using a computer. Many of the handouts will also come to you as e-mail
attachments, as will several computer templates.
WebCT:
We are going to experiment with migrating some of the materials toward WebCT
primarily for use in record keeping (Grades, assignment submissions, etc.).
Feedback appreciated.
Attitude:
The required attitude can be communicated through a personal statement about the
course. My two overriding principles of education are as follows: 1) I expect to
have fun and I expect everyone else to have fun; and 2) I expect to learn and I
expect everyone else to learn. However, I don't see why these two activities can't
occur at the same time. In fact I believe the resistance to learning is lowest when
having fun. To facilitate the "fun-learning" model, each individual must be willing
to contribute positively to the process. Hard work, honest intellectual interchange,
and creativity therefore pay high dividends.
2
You are also expected to conduct yourself in a professional and courteous manner
throughout this course, both with regard to your interactions with the instructor and
with each other.
Required statement on Academic Integrity
The University statement on your obligation to maintain academic integrity is:
"If you engage in an act of academic dishonesty, you will become liable to severe disciplinary
action. Such acts include cheating; falsification or invention of any information or citation in an
academic endeavor; helping or attempting to help others commit academic infractions;
plagiarism; offering bribes, favors or threats; academic interference; computer-related
infractions; and failure to comply with research regulations."
Rule 33 of the Code on Campus Affairs and Handbook of Policies and Regulations Applying to
All Students gives complete details of rules governing integrity for all students. You are
responsible for knowing and abiding by these rules.
Grading:

Quizzes*(2 or 3 or so)

Midterm 1 (first part of Oct.)
25%

Midterm 2 (first part of Nov)
25%

Homework/participation**
10%

Course Project
5%

Final Exam
10%
Total:
25%
100%
Grades will typically be assigned based on a z-score.
Quizzes will be given when it appears that they would be helpful. They are generally announced
one day ahead in class.
**
There will be about 10 homework opportunities with 10 points per exercise. No late
homeworks will be accepted.
*
3
Approximate Calendar through MT1:
Note that the Homework Dates tend to move around a bit, but the MT1 date is fairly firm. The
complete/official calendar will be maintained on the class web site.
Date
Topic
Assignment
Materials/other
Aug. 23
Course Overview, introductions,
financial concepts, pictures
picture
Syllabus, assessment, course
components
Aug. 25
Aug. 28
Balance Sheet Preparation
e-mail check
BEHB 1-3, notes
Balance Sheet preparation and
Analysis
Download
templates
Income Statement Preparation
HW 1 – out
BEHB 3 , read 4
Income Statement Preparation
HW 1 - due
Notes, templates
HW 2 - out
Notes
HW 2– due
BEHB 5,6
Aug. 30
Sept. 1
Sept. 4
All Campus Holiday
Sept. 6
Sept. 8
Statement of Cash Flows, SOE
Proforma statements and analysis,
sample problems.
Sept. 11
Use of programs…
Sept. 13
Finish Statement Construction
HW 3 – out
Handouts
Sept. 15
Analysis of Performance
HW 3 – due
Handouts
Sept. 18
Capital Structure, leverage, ROE
Sept. 20
Capital Structure, continued
Sept. 22
Growth, risk, and some useful
statistical methods.
Sept. 25
Preferences, Utility, Risk, A/P,
insurance valuation ideas
Sept. 27
Class Calendar Catch up day
Sept. 29
Oct. 2
FAST
Handouts
HW 4 – out
BEHB 6, 7
BEHB 7
HW 4 – due
BEHB 8
Midterm Review
Bring Questions
Handouts
Midterm 1
Good Luck
4