Corporate Finance and International Financial Management (August 2023)

Course name: CORPORATE FINANCE AND INTERNATIONAL FINANCIAL MANAGEMENT

Course code:   MBA 6211

Level of course:  MASTERS

Credit units:  4

Brief course description

This course is designed to introduce students to the world of finance and basic financial tools for decision-making. This course focuses on the functions of financial management and on the aspects of risk and return relationship. Particular emphasis is placed on Time Value of Money (TVM), including: Future and Present Values concepts; interest rates as indicators of the price of money in the market; and basic risk measurement tools (Standard Deviation and Beta). Students will gain an understanding of types of businesses, financial statements, the Discounted Cash Flow (DCF) methodology (using TVM), types of financing, and the Net Present Value method for projects analysis. Students will also review cash management process. 

International financial management provides students with knowledge in risk management techniques in derivatives and other assets possessed by organizations. It gives students appropriate understanding about the concept of risk and uncertainty in management and allows appropriate measures to be taken in management of risks and uncertainties.

The course also informs students about the world opportunities for international financing opportunities, investing in overseas countries, understanding the global financial system which provides a range of opportunities and challenges for business growth and development. International financial management focuses greatly on multinational investments, analysis of overseas investments, political risks, other components of risks. It also covers the concept of public risk and the origin of debt burden.

Objectives

1. To consolidate and develop knowledge of financial decision making

2. To identify and appreciate the factors that impinge on the making and implementation
of financial decisions

3. To promote an understanding of how financial markets operate

4. To empower students to build mastery skills in the theories and practices of International Finance.

5. To gain in-depth understanding of the financial globalization and global financial system, how it shapes financial activities internationally.

6. To demonstrate key concepts in financial engineering, including risk management and managing instabilities in interest rates and currency exchanges.

7. To master the contemporary risk management strategies in financial and capital markets as the domains for successful financing and businesses growth locally and internationally.

Learning Outcomes

At the end of this course students should be able to:

1.   Appreciate the different issues that an entity has to grapple with in the area of finance

2. Understand various sources a company can use to finance its activities

3. Calculate the value of stocks, bonds and assets

4. Determine the appropriate capital structure for a firm

5. Set a suitable dividend policy

6. Be conversant with the procedures for issuing and retiring securities.

7. Be able to identify and evaluate appropriate investments for the firm.

8. Appreciate the global financial system and link it to financial deepening of financial system in different economies.

9. Demonstrate clear understanding about risk management techniques; by management exchange rate risks, interest rate risks and other risks.

10. Demonstrate an understanding about foreign investments, analysis of international investments and managing such investments.

Detailed course description (content)

Introduction  

· The role of the Financial Manager or Controller in an organization.

· Introduction to financial markets and their intermediation role

· Corporate Objectives

Business organizations and the business environment

· Forms of business organizations

· Financial institutions

· Financial markets

Financing decisions

Types of Financing

· Retained Earnings

· Issuance of new shares: equity and preference shares

· Long-term loans (bonds and debentures)

· Short-term loans (overdrafts, creditors, etc.)

Capital Structure

Dividend Policy

The concept of cash flow and analysis of financial statements

· Preparation of cash flow statement

· Preparation of cash budget

· Financial ratios, trend analysis and the limitation of ratios

Working capital management 

Time value of money

· Present Value

· Net Present Value

Risk and return 

The cost of capital

· The cost of capital as an opportunity cost of finance

· The cost of capital and risk

· The costs of different sources of finance

§ Equity

§  Preference shares

§  Debt capital

· Debt capital and taxation

· The Weighted Average Cost of Capital (W ACC)

Investment decisions

Capital Investment Appraisal:

The principal methods of evaluating capital projects

· The Accounting Rate of Return

· The Payback Method

· The Discounted Cash Flow Method (DCF)

· The Net Present Value (NPV)

· The Internal Rate of Return

· International Investment Appraisal

· Non-Financial Considerations

Expansion strategies

· Organic growth

· Mergers

·  Acquisitions

Divestment

VALUATION OF SECURITIES: DEBT AND EQUITY

Valuation of Equity

· Reasons for Share Valuations

· Asset Valuation Bases

· Earnings Valuation Bases

· Cash Flow Valuation Methods

· Dividend Model

· Other Valuation Bases

Valuation of Debt

Efficient Market Hypothesis

· Weak form efficiency

· Semi - strong efficiency

· Strong form efficiency

Capital Asset Pricing Model (CAPM)

The Arbitrage Pricing Model (APM)

MERGERS, ACQUISITIONS AND TAKEOVERS

International Finance

· International Financial system

o The world Bank, IMF, IBS

o The global debt system

Global Financial Management

· International asset markets (real assets markets)

· Raising funds overseas

· Managing international assets

The concept of risk management

· Interest rate & Foreign exchange risk

· Protecting against/Hedging risks

· Strategies of risk management

· Futures market & contracts

· Forward rate agreements

· Options, Swaps, swaptions

· Synthetics

Treasury management

· Asset and liability management

· Deals and how to manage them

Appraisal of International Investments

· Portfolio investments and risk management

· Foreign direct investment

· International direct investment

· International capital budgeting

· International capital structure

· Political risk

Raising finance capital overseas

· International capital markets

· International banking

· International Money markets

Global Financial management

· Raising and Managing financial resources in multinational groups

Mode of delivery

Lectures

Discussions and presentations

Mode of assessment

Continuous assessment 50%

Final assessment 50%

References

Kakuru, J. (2007) Finance Decisions and the Business. Kampala: Fountain Publishers.

Ross, S., Trayler, R., Bird, R., Westerfield, R., and Jordon, B. (2008) Essentials Corporate Finance. Australia: McGraw-Hill.

Brealey, R., Myers, S., and Allen, F. (2007) Principles of corporate finance. 9^th edition. Boston: McGraw-Hill.

Ross, S., Thompson, S., Christensen, M., Westerfield, R., and Jordan, B. (2007) Fundamentals of corporate finance. Australia: McGraw-Hill.

Neale, B., and Pike, R. (1999) Corporate Finance and Investment. 3^rd edition. London: Prentice Hall

Brown, K. C., and Reilly, K. F. (2010) Analysis of Investment and Portfolio Management. 9^th edition. Australia: South- Western College.

Shapiro, A. C. (2009) Multinational Financial Management. 7^th edition. New York: Pearson.

Pandey, I. M. (2009) Financial Management. 10^th edition.  New Delhi: Vikas Publishing House Pvt. Ltd.