BA331 Financial Management
Summer 2006
Dr. Marmé
Office: Sorensen
267
Office Phone:
(309) 794-7514
Email: ecmarme@augustana.edu
Required text: Scott, Jr., Martin, Petty and Keown, Financial Management:Practices and Applications (10th edition, Prentice Hall)
BA331 provides an introduction to corporate financial management. Finance along with marketing and production (management) represent the three major decision making areas within a firm. These three areas are by no means entirely separate from one another. No matter what area of a business you are involved in you will face financial constraints and your actions will affect the financial position of the company.
Course Objectives: (1) To familiarize you with the basic principles of financial management, with an emphasis on corporate finance. (2) To help further develop your higher order thinking skills (HOTS)
HOTS and BA331: In this class I will ask you to go well beyond demonstrating basic knowledge of key terms and procedures. Throughout this term my goal will be to help you develop a far deeper understanding of the material. This means my helping you get to the point where you can demonstrate: (1) that you understand what we are doing so well that you can explain it in plain every day language, (2) that you understand the techniques and results of procedures clearly enough that, on your own or in groups, you can apply the appropriate techniques to a given problem, (3) that you can organize financial information in a sensible way and differentiate between one set of results or procedures and other results and techniques and (4) that you can begin to crictically evaluate arguments about a company's current financial position and its proposed policies.
HOTS is very important. Mastery of higher order thinking skills is an integral part of what it means to say that you have had an excellent college education.
We will have three to four takehome quizzes, an in-class midterm exam and an in-class final. All work will be cumulative. The quizzes will count for 40% of your course grade and the midterm will count for 30% of your grade. The midterm exam will be Tuesday of week 3, June 20th. The final will be given Friday JUne 30th.
The final will be worth 30% of your overall grade. Note also that up to 5 points extra credit will be awarded for "meaningful" class participation (see below)
Coverage:
Introduction to financial management and
financial markets: Chapters 1 and 2.
Time value of money: Chapter 5.
http://www.busadm.mu.edu/mandell/ad.html
Note that the thrust of 331 is on corporate finance. The principles outlined in chapter 5 as well as those covered in later chapters can be applied to personal finance as well. A good place to start looking into this is at this link (please click here)
For information on rates currently being paid and charged visit Bankrate.com.
Risk and return: Chapter 6.
Bond Valuation: Chapter 7.
Stock Valuation: Chapter 8.
Capital Budgeting/Project Appraisal Chapters 9-11.
Cost of Capital: Chapter 12.
Creating Shareholder Value: Chapter 13.
Click here to learn more about Stern Stewart and Co.
For more detail regarding EVA click here.
Raising Capital in Financial Markets: Chapter 14.
Analysis and Impact of Leverage: Chapter 15.
Asset Management: Chapter 18-20.
As we work through algebraic versions of the examples given in chapter 18 thank
Mohammed ibn-Musa al-Khwarizmi
Analysis of firm performance: Cash flow and ratio analysis: Chapter 3.
Forecasting, planning and budgeting: Chapter 4.
(1)
The midterm exam and the final will be a mixture of (1) mutiple choice and other objective questions and (2) essays or detailed written responses to questions asked. A list of questions that you should review WELL BEFORE the midterm and final exams will be available to help you prepare. Please do NOT wait until the night prior to either to begin reviewing these questions. All that will result is an anxiety attack before the test and a significantly poorer grade on the exam.(2) Attendance. Attendance is not mandatory. However, I do hold you guys responsible for material that we've covered in class, even if it is not in the textbook and even though you've missed class.
Please keep in mind that in borderline cases your grade will be decided on the basis of attendance and class participation. For example, suppose that you are on the C/D borderline. Suppose further that you have frequently cut class. Suppose that when you have come you have used it as an opportunity to catch up on your beauty sleep. In such a case I will assume that you could have done better but you simply weren't interested and will be happy with a D. The higher grade will go to students who have put in the time and the effort. Final word on attendance: (1) Absences hinder your learning (there is reason for holding classes, just ask any student who has blown off class and then tries to pick up on what has been covered by just reading the text/reviewing somebody else's notes). (2) Absences also hurt the overall well-being of the class. As entertaining as I usually am, class is not a performance or a show. Your participation is an integral part of class and helps to shape what we all learn together. I am not the "sage on the stage" but your "guide at your side". If you're not in class to be helped or guided, I can't help or guide you. (Read the following regarding class participation.) (3) Class participation.I don't give lectures
, I conduct classes. There is an important difference between the two. In a lecture, a student is expected to passively sit and receive the little pieces of wisdom that the professor decides to share or "profess". (NB: The word lecture itself comes from the Latin word lectus or a derivative of the Latin legere "to read". You have got a text and can read on your own. I don't need to lecture or read to you. Lectures should have gone out with the printing press.) In a class or group (check the dictionary for the derivation of the word class), the student is expected to be just that, part of a group dedicated to the study of that day's topic.To measure your contribution to our group effort or your class participation, I will give each of you a large index card on the first day of class. You will put your name on it.
If you feel that you have made a contribution to a particular day's class make a somewhat detailed note of that contribution and turn this card in to me at the end of class. I will return the card to you at the start of the next class. I will award points for these daily contributions
.At the one end of the spectrum your contribution may be something as simple as asking me to clarify what we have already
covered. At the other end of the spectrum, it may be something as sophisticated as responding to a point raised by another student or bringing up something from outside class that is relevant to what we are discussing.(
4) Annotated notes. Annotated class notes are a big help. What are annotated notes you ask? Set aside one note book completely for Money and Banking. Write the days notes on the sheet on the right hand side of the notebook. After each class, go over your notes. (Research indicate that the sooner after class or readings that you review the better.) On the sheet on the left hand side of your notebook write out the main formulae and the main definitions that you have worked with on that day. ALSO IT IS IMPORTANT THAT YOU -ON YOUR OWN- WORK THROUGH THE NUMERICAL EXAMPLES WE DO TOGETHER IN CLASS.(
5) Key to success. Clarify your doubts right away either in class or soon after. If you are not sure about something do not pray to all that's good and holy that I will not ask you about that particular topic. You can be almost certain I will ask questions over such material.(
6) Motivation/Participation. It is my job to teach you this subject. It is YOUR job to convince yourself that what you are learning here is important and relevant. It is also YOUR job to convince yourself that what we cover in this class is interesting and worth the time you will have to invest in studying. More than just showing up and possibly answering questions when asked to, you need to think about what we're discussing in class outside of class time and to listen to questions other students raise concerning the material both in class and outside of class.Problems with a course frequently start at the point where the student makes up his or her mind that the entire topic is not worth the close attention it demands to master it. Also note that while it is unlikely that you will feel that we are going too slowly over the material but if so please let me know. I will happily give you other material to look at. This material will add additional depth to what we are working through together in class. Finally pretend that this class is your first job. Just as you would try to impress your new boss by being as attentive and interested as possible try to impress me by doing the same here (besides this think about what you have read above regarding attendance and class participation).
Good letters of reference and decent grades are an integral part of inital success in the job market. Remember that both these things come from your professors!(
7) Office hours: One really wonderful aspect about summer is that there is a great deal more flexibility to my schedule. I do not have office hours officely posted on my website. If you meed to see me, we can set up a time that is good for the both of us. (8) Late work: A pain for you and most definitely a pain for me. If you turn stuff in to me on time you have a good chance of getting it back soon enough to benefit you. With work turned in late, there is far less of a chance that I will get the time to look at it carefully and to really help your learning. Bottom line, unless we've discussed it before hand and there is good reason for the delay, late work=0 credit on that assignment.(9) Basic truth #1. Much of this material is hard. You have to put in the time and the effort to master it (Please see above). You are not to suffer silently. Keep up with the material, don't try to cram (it won't work) and, if you are having trouble, let's sit down together and review your study habits. Actively review your notes, when you don't understand something in either your notes or the text come in to see me.
Basic truth #2 You need to read the book. I had a student in one class a few terms ago who had stopped reading the book after the third week and instead relied solely on class notes. His reason for not reading the book was that it confused him. His scores however went from a 78 on the first exam (a period in which he was reading the book) to a 65 on the second exam and a 52 on the third exam. Ask yourself what one should conclude from this story.
Basic Truth #3. Once you have graduated and are in the real world a year or two a lot of this material will become exceedingly relevant to you . If you pay attention now you'll have a lot less to learn in the school of hard knocks later on.