Financial Analysis for Managers

Lecturer: DrN icholas Carline

Introduction and Aims

The module aims to provide a basic understanding of some of the fundamental concepts and techniques of the financial management of companies. The first lectures will deal with the financial management objectives of companies, the role that financial markets play as a source of finance and feedback on company policy decisions, and the differences between accounting and finance.

Discounting and compounding techniques will then be dealt with at length to provide an understanding of the time-value-of-money and the ability, based on assumptions, to move money around in time from the present to the future and the future to the present.

The above background will provide a basis for valuing stocks and bonds based on cash-flow forecasts, and for discussing returns to investors and the risks they face. Ideas of risk and its measurement will be introduced at a basic level. The concept of net-present-value will be introduced and its application to capital investment decisions considered, along with other appraisal methods such as the internal-rate-of-return and payback period.

The final lectures will cover issues related to how companies can attempt to manage risk. Risk management techniques such as forward/futures contracts and options will be covered at an introductory level.

Throughout an attempt will be made to link the theory of financial management with what is observed in practice. Although the module will contain some material of a technical and theoretical nature it is designed for a cohort of aspiring general managers, rather than finance specialists. As such, no prior knowledge of finance is presumed for the module. However, knowledge of accounting to a level equivalent to the Semester 1 module 07 15828 Financial Accounting is presumed. The module will be delivered over 10 weeks, with each week comprising of a 2 hour (interactive) lecture, immediately followed by a 1 hour tutorial.

Objectives and Learning Outcomes

  • Discuss the financial system and measure return and risk.
  • Apply the quantitative techniques, and explain the principles, for the evaluation of future cash-flows (time-value-of-money).
  • Use and explain discounted-cash-flow-analysis (net-present-value and alternative investment rules) for the evaluation of real investment projects (capital-budgeting).
  • Use and explain basic valuation models for financial assets (bonds and common stocks).
  • Discuss the basic idea of risk management, and compare and contrast hedging and insuring using derivative securities (forwards, futures, and options).

Module Assessment

Mid-Term Test Multiple-choice test in Week 9 to count for 25% of the overall assessment

Group Assignment Group based assignment to count for 25% of the overall assessment

Examination Final unseen examination to count for 50% of the overall assessment

The group assignment has to be submitted no later than 12.00 noon on 20 March 2013. Details relating to this assessment will be provided at the start of the module.