Financial Managemement II Module

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Course overview

One of the most important functions of the financial manager is to ensure that funds are used in the most efficient manner, directly affecting the growth, profitability and goodwill of the organisation.

In this module we will examine valuation – the process that links risk and return to help us determine the worth, or value, of investments – concentrating on the valuation of investments from the investor’s perspective. Next we will look at the cost of capital from the company’s perspective, types of capital, and a technique to calculate expected return on investment (the expected average future cost of total weighted funds). We will also examine a project appraisal approach to making “make or buy” decisions. And since dividends amount to large cash outlays for companies and signal different things to their shareholders, we will scrutinise dividend policy and associated topics, and look at whether the organisation should pay out money to its shareholders, or invest it.

Learning outcomes

 

Upon completing this course, students should be able to:

  • Explain valuation terminology, concepts, and inputs;
  • Determine the worth of investments (debentures, preference shares, and ordinary shares) using valuation models;
  • Calculate the cost of debt financing (term loans and bonds);
  • Calculate the cost of equity financing (common shares, preference shares and retained earnings);
  • Determine the weighted average cost of capital for a company;
  • Apply project appraisal techniques (capital rationing and “make or buy” approach);
  • Explain dividend terminology and policy decisions; and
  • Understand ethical issues facing financial managers.