ADCF 457 Seminar in Finance

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ADCF 457/455 Syllabi Abstract Spring 2011 1
ADCF 457 Seminar in Finance
ADCF 455 Strategic Financial Management Syllabi Abstracts
LeMoyne-Owen College
Accelerated Degree Completion Program
Dr. Katherine Causey, Chair (901) 435-1259 [email protected]
Dr. Michael O. Minor, Instructor (901) 826-8355 [email protected]
www.michaelominor.com
FaceBook Group Page: LOC Real Estate Finance/Development
ADCF 457 Seminar in Finance
Before Class
I.
Secure Textbook
II.
Complete Reflection Paper (See details below.)
a. Pre-Assignment: Reflection Paper due via e-mail Wednesday, April 27, 2011,
11:59 p.m.
April 28, 2011
Excel
1. Courses Overview/Assign Groups
2. Eight Principles of Finance
3. Financial Statements: Using Excel
4. Finance: Post TARP
5. Case Study Review
a. Assignment 1: Eight Principles of Finance Report due via e-mail Wednesday, May 4,
2011, 11:59 p.m. (See details below.)
May 5, 2011
Real Estate Finance
1. Review Previous Class Discussion
2. Case Study Assignment Overview
3. Real Estate Finance
a. Assignment 2: What’s the Best Mortgage Deal? due via e-mail Tuesday, May 17,
2011, 11:59 p.m. (MAXIMUM three pages APA formatted)
May 12, 2011
ADCP Spring Break
May 19, 2011
Consumer Finance/Retirement
1. Review Previous Class Discussion
2. Consumer Finance/Retirement
a. Assignment 3: Can I Afford to Retire? due via e-mail Wednesday, May 25, 2011,
11:59 p.m. (MAXIMUM three pages APA formatted)
ADCF 457/455 Syllabi Abstract Spring 2011 2
May 26, 2011
Group Work for Case Study Presentations/Open Topics
1. Online Class: Watch and/or Listen to Network Finance Shows
2. FaceBook Group Discussion of Retirement Issues and Open Topics
a. Assignment 4: Summary of Network Finance Shows due via e-mail Tuesday, May
31, 2011, 11:59 p.m. (MAXIMUM three pages APA formatted)
b. Assignment 5: ADCF 455 Corporation for Financial Research Report due via e-mail
Wednesday, June 1, 2011, 11:59 p.m. (MAXIMUM one paragraph)
June 2, 2011
Finance Today
1. Course Review
2. Case Study Presentations
3. Financial Research Report Overview
ADCF 455 Strategic Financial Management
June 9, 2011
1. In Class Financial Research Report Example
2. Finance in the News
June 16, 2011
1. In Class Financial Research Report Example
2. Finance in the News
June 23, 2011
Online Class: Group Work for Financial Research Report
a. Assignment 1: Financial Research Report due via e-mail Monday, June 27, 2011, 11:59 p.m.
(details given by Week 4 of ADCF 457)
b. Assignment 2: Reflection Paper due via e-mail Wednesday, June 29, 2011, 11:59 p.m.
June 30, 2011
Financial Research Report Presentations
Reflection Paper: In an APA formatted MAXIMUM three page paper not including cover page,
students will write about what they have learned in the previous four courses. The report is due
via e-mail by 11:59 p.m., Wednesday, April 27, 2011. Be sure to use specific examples. No
citations are needed. This paper is based on your personal experiences.
Eight Principles of Finance Report: There are eight principles of finance. Knowledge of these
eight principles is essential for understanding the field of finance. To demonstrate mastery of
these eight principles, students will copy and paste a finance word problem from a previous
assignment or other source for each principle as well as excerpts from a finance news article
showing a real world application. See example below. This report is due via e-mail by 11:59
p.m., Wednesday, May 4, 2011. This report does not have to be APA formatted.
ADCF 457/455 Syllabi Abstract Spring 2011 3
For example, principle 3 is time value of money.
Principle 3. Time Value of Money
Relevant Finance Problem:
Determine how much $500 invested today will grow to in four years if the investment
earns 10 percent interest per year.
Real World Application: Return on CDs
Source Web Link:
http://money.cnn.com/2009/03/11/magazines/fortune/investor_daily.fortune/index.htm
Relevant Excerpt: With all those caveats, CDs still offer superior returns to most other
secure investments. The highest yielding one-year CDs on bankrate.com - all of which
are FDIC-backed - offer yields between 2% and 3%. While that's less than what it was
last summer, it's still much higher than the 0.7% yields on one-year Treasurys
The 8 Principles of Finance
Knowledge of these eight principles is essential for understanding the field of
finance. Make sure that you master each of them.
1. Risk-Return Tradeoff
The higher the risk of an investment, the higher the expected return must be.
2. Leverage
Leverage is a magnification of earnings that results from having fixed costs in the
company. Simply put, leverage is a measure of the degree of sensitivity of earnings to
some other measure.
(a) Operating leverage
A magnification of earnings (Net Operating Income or EBIT) that results from having
fixed operating costs in the company. (Examples of fixed operating expenses are
salaries, utilities, depreciation, and property taxes.)
(b) Financial leverage
A magnification of earnings (E.A.T.) that results from having fixed financial costs in
the company. (The only type of fixed financial cost considered here is interest
expense.)
(c) Total or combined leverage
A magnification of earnings that results from having fixed costs of any type in the
company.
ADCF 457/455 Syllabi Abstract Spring 2011 4
Total Leverage = Operating Leverage x Financial Leverage
Formulas:
Operating leverage is equal to the percentage change in operating income divided
by the percentage change in sales.
Financial leverage is equal to the percentage change in net income divided by the
percentage change in operating income.
Total leverage measures the percentage change in net income divided by the
percentage change in sales.
3. Time Value of Money
Money has a time value. A rational person is not indifferent between having a dollar
today or a dollar in the future. Regardless of inflation, a dollar today can be invested and
will earn a return over a period of time.
4. Valuation
The value of an asset is equal to the present value of its future cash flows. The rate
used for the present value calculations (the capitalization rate) should be the minimum
acceptable return, given the risk of the investment.
Value = Present Value of Future Cash Flows
or
Value = Future Cash Flows x Present Value Factor
5. Bond Price vs. Interest Rates
There is an inverse relationship between market interest rates and the price of existing
fixed income securities. E.g., as interest rates rise, prices of existing bonds will fall.
6. Liquidity vs. Profitability
There is a trade-off between liquidity and profitability; gaining more of one ordinarily
means giving up some of the other.
ADCF 457/455 Syllabi Abstract Spring 2011 5
7. Matching Principle (or the Principle of Suitability)
The maturity of a firm’s assets should match the maturity of the firm’s liabilities, i.e.
short-term assets should be financed with short term liabilities; long-term assets should
be financed with long-term sources of financing.
If you violate the matching principle, you create a problem either of too little liquidity or
too little profitability.
8. Portfolio Effect (or Diversification)
As assets are added to a group (portfolio), the risk of the total portfolio decreases. This
will be true as long as the correlation of the asset being added and the portfolio is less
than +1.0.
Source:
http://campus.murraystate.edu/academic/faculty/larry.guin/Principles/IndexPrin.htm
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