Finance Management (FINA 3000) Financial expert FULL online course 4 weeks
Module 1
Maymester 2021
FINA 3000
Course Introduction: FINA 3000
Goal: The field of finance is very broad, covering investments, corporate financial policy, security markets, banking and other intermediaries, the role of government and the international sector, and personal finance. In FINA 3000, we survey several of these key components of the financial system. The goal is for finance majors to have a strong background for their major courses, and for non-finance majors, the goal is to develop a set of finance tools that will be useful in future employment and daily life.
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My Background
UNC-Chapel Hill BA Economics (2013)
UNC-Chapel Hill Masters in Accounting (2014)
Worked in external audit for 3 years with Deloitte in NC
NC CPA License
4th year Finance PhD Student
Taught FINA 3000E 3 times, ACCT at UNC, and been Dr. Pope’s TA for the last 4 years
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Syllabus
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Areas of Finance
Module 1
Objectives:
Identify traditional areas of finance
Describe the “guiding principles of finance”
Compare and contrast different types of business organizations
Describe the role of the financial manager
Define debt and equity
Compare and Contrast debt and equity
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Areas of Finance
Money and Banking
Bringing together lenders and borrowers
Investments
Managing and valuing assets
Financial Management
Financial planning and strategy within a firm
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Guiding Principles of Finance
Maximization of Wealth
Time value of Money
Risk/Return tradeoff
Leverage
Diversification
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Maximization of Wealth
What is a firm’s job?
Traditionally: maximize shareholder wealth/maximize profits
Recently: Environmental/Social/Governance initiatives have come into focus
Maybe job of the firm is to maximize welfare of all stakeholders?
What about Non-Profits?
In this class, we assume that firms maximize wealth with the resources that they have.
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Time value of Money
How do we compare cash flows today with cash flows in the future?
Key concept: Opportunity Cost of Capital as compensation for time and risk
If I lend money my money out today, I can’t spend it on something I want right now (delayed consumption)
If I invest all my money in BTC, I can’t then go lend it to my rich uncle (compensation for risk)
This is the most important concept in this class!
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In general, investors are going to require greater returns for taking on greater risks.
Risk/Return Tradeoff
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Definition: Leverage is the percentage of debt that a firm has in its capital structure
Increasing debt increases risk and returns
Leverage
| Firm | Equity | Debt | Leverage % (D/E) | Income | Net Income | ROE |
| A | 2 million | 0 | 0% | 5 million | 5 million | 2.5 |
| B | 2 million | 1M @ 10% | 50% | 5 million | 4.9M (5-1*.1) | 2.45 |
| C | 2 million | 1M @ 10% | 50% | 4 million | 3.9M (4-1*.1) | 1.95 |
| D | 2 million | 1M @ 10% | 50% | 6 million | 5.9 (6-1*.1) | 2.95 |
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“Do not put all your eggs in one basket”
Protection against one really bad event taking us all the way bankrupt
Diversification
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Sole Proprietorship
Corporation
Partnership
Types of Businesses
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Sole Proprietorship
Owned by a single individual
Advantages:
Single Taxation
Autonomy
Easily formed
Disadvantages
Unlimited personal liability
Difficulty raising outside capital for growth
Life of the business – usually ends with owner’s death
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Partnership
Owned by a group of individuals
Advantages generally same as the Sole Proprietors
Disadvantages:
General Partner vs. Limited Partner
General Partner unlimited liability
Limited partner liability capped at initial investment
Cant make any managerial decisions though
Difficult to raise outside money
Business success somewhat dependent on relationship dynamics of partnership
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Quick note on LLCs
Very popular company structure for entrepreneurs
Liability capped as long as personal and business transactions kept separate
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Corporations
Considered by law to be living entity and separate from its owners
Advantage:
Limited Liability
Easy to raise capital
Easy to transfer ownership
Disadvantages:
Less Autonomy/ more regulation
Double taxation
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Module 2
Financial Statements and Accounting Ratios
Quick Overview of the Financial Statements
Should be a review of Accounting courses
Balance sheet:
Provides a snapshot of firms position at a point in time
Accounting Identity: Assets=Liabilities + Shareholder Equity
Income Statement
Provides a report of firm activity over an accounting period
Statement of Cash Flows
Follows cash through the entity’s operations
Way to reconcile balance sheet and income statement activities
Bonus: Statement of Changes in Equity
Breaks down the changes in stockholder’s equity from one period to the next
Important because changes in equity could be caused by net income or some other factors
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GME 2020 Balance Sheet
GME 2020 Income Statement
GME 2020 Statement of Cash Flows
3/23 is the date that the GMA annual report was released
GME Stock Chart
Or
Free cash flow is the cash that is created for investors by running the business
Cash after investment in NWC and equipment
We do not account for interest or dividends here
Free Cash Flow
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Enterprise Value
Enterprise value measures the total market value of the firms assets:
Generally, we assume that the market value of debt is the carrying value of debt on the balance sheet
Same is not true for MV of equity:
Market Cap=# Shares outstanding*Price per share
Accounting Equity measures what has occurred in the past
Finance Equity measures expectation of future growth and performance
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How do we Use Financial Statements
We can use the financial statements of the firm to analyze performance and compare companies.
Financial Ratios allow us to answer some performance questions and evaluate the financial standing of the firm
Have to be careful though:
Financial statements are all based on accounting data
Sometimes, not that accurate
Always backwards looking
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Context of Financial Ratios
Often ratios based on only current financial statements are lacking context
Useful to compare to time series, industry peers
Also need to analyze the footnotes of the financial statements and metrics that are ”outside of the numbers”
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Liquidity Ratios
Liquidity: how easily an asset can be converted to cash
Key Ratios:
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GME 2020 Balance Sheet
Liquidity Ratios
GME Current Ratio:
GME Quick Ratio:
GME Cash Ratio:
What makes a good liquidity ratio?
Tradeoff between high liquid reserves and efficient allocations of capital
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Working Capital Ratios
Turnover: How many times does a company cycle through a working capital account per year (on average)
Higher turnover generally indicates higher efficiency
These ratios use both the balance sheet and the income statement
Key Ratios:
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GME 2020 Income Statement
GME 2020 Balance Sheet
Working Capital Ratios
GME AR Turnover:
GME Inventory Turnover:
GME AP Turnover:
What do these numbers even mean?
Cycle through these accounts 10 times a year? Why is that important?
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Working Capital Ratios
Better measure may be to see how long it takes company to collect on sales, sell inventory, or pay their debts
Related to turnover but we can figure out the average number of days
Operating Cycle
Measures how quickly a company can sell inventory and collect on the sale (product life cycle)
Working Capital Ratios
GME Days Sales Outstanding:
GME Days Held in Inventory:
GME AP Turnover:
GME Net operating Cycle:
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Profitability Ratios: Income Statement
Using the income statement, we can measure dollar of income created per dollar of sales
Gross Profit Margin:
Operating Profit Margin:
Net profit Margin:
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GME 2020 Income Statement
Profitability Ratios
Gross Profit Margin:
Operating Profit Margin: -.05
Net profit Margin:
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Profitability Ratios: Balance Sheet
Probably two of the most commonly quoted and used ratios
Measures dollars of net income generated for every dollar of invested capital
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GME 2020 Balance Sheet
Profitability Ratios: Balance Sheet
Be careful with negative ROA or ROE
Not always a bad thing but if consistent – sign of trouble
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Debt Ratios
Debt ratios measure companies’ capital structures and ability to service their debt
High ratios generally are not good for equity shareholders
Key Ratios:
Debt-to-Assets: Total Debt/Total Assets
Debt-to-Equity: Long Term Debt/Shareholder Equity
Times interest earned (TIE Ratio): EBIT/Interest Expense
Careful when examining these ratios - lots of different conventions
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GME 2020 Balance Sheet
GME 2020 Income Statement
Debt Ratios
For GME:
Debt to Assets=2036/2473=.82
Debt to Equity (including lease obligations)=(216+457)/437=1.53
Debt to Equity (Excluding Lease Obligations)= (216)/437=.49
Times Interest Earned=-238/34=-7
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Market Ratios
All of the ratios that we have used to this point are backwards looking
What if we want to analyze future prospects
Can use market data
Market to Book = MV of Equity/BV of Equity
Price to Earnings= Price per share/Earnings per Share
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GME 2020 Balance Sheet
GME 2020 Income Statement
3/23 is the date that the GMA annual report was released
GME Stock Chart
Market Ratios
GME Market to Book:
GME MKT CAP=$181.75*65.3 million shares out=$11,868 million
GME Book Equity= 437.8
GME MB Ratio=11868/437.8=27.11
GME Price to Earnings:
GME Earnings per share -3.30
Price is 181.75
GME PE Ratio=181.75/-3.3=55.1
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What do all these numbers even mean?
| GME | Firm X | |
| Current Ratio | 1.15 | 1 |
| Quick Ratio | 0.32 | .3 |
| AR Turnover | 41.2 | 87.3 |
| Inventory Turnover | 5.25 | 9.4 |
| Net Operating Cycle | 43.7 | 1.3 |
| Gross Margin | .25 | .248 |
| Net Profit Margin | -.04 | .02 |
| ROA | -.09 | .07 |
| ROE | -.49 | .162 |
| D/E | 1.53 | .667 |
| TIE | -7 | 11.6 |
| P/E | -55.1 | 29.6 |
| Price on 3/23 | 181.75 | 133.94 |
What do all these numbers even mean?
| GME | WMT | |
| Current Ratio | 1.15 | 1 |
| Quick Ratio | 0.32 | .3 |
| AR Turnover | 41.2 | 87.3 |
| Inventory Turnover | 5.25 | 9.4 |
| Net Operating Cycle | 43.7 | 1.3 |
| Gross Margin | .25 | .248 |
| Net Profit Margin | -.04 | .02 |
| ROA | -.09 | .07 |
| ROE | -.49 | .162 |
| D/E | 1.53 | .667 |
| TIE | -7 | 11.6 |
| P/E | -55.1 | 29.6 |
| Price on 3/23 | 181.75 | 133.94 |
What’s going on in class tomorrow?
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Homework due on 5/24
Start on Time Value of Money
SUMMER 2021
FINA 3000: Financial Management
Syllabus
Daily 9:00-11:45 am; Orkin D007
“I will be academically honest in all of my academic work and will not tolerate academic dishonesty of others."
· UGA Student Honor Code http://www.uga.edu/honesty/
Instructor : Will Bost
B358 Amos Hall
Office Hours: Monday and Wednesday, 1:00-2:00
This course will be delivered in a face-to-face format. Office hours will be held face-to-face or via Zoom. Attendance is not a graded component of this course but will likely improve your understanding of the material and performance in class.
Master Syllabus Elements:
a) FINA 3000: Financial Management
b) Course Description: The basic concepts and analytical tools of finance in both corporate finance and investments. Topics include risk and return, financial institutions, efficient markets, valuation theory, capital budgeting, portfolio theory, cost of capital, and international finance.
c) Prerequisites, corequisites, and cross-listings for the course:
ACCT 2101 and (MIST 2090 or CSCI 1100-1100L)
d) Course objectives or expected learning outcomes:
The goal is for finance majors to have a strong foundation for their major courses, and for non-finance majors, the goal is to develop a set of finance tools that will be useful in future employment and daily life.
e) Topical outline:
1. Interpreting & Forecasting Financial Statements
2. Time Value of Money
3. Capital Budgeting
4. Principles of Asset Valuation
5. Overview of Risk Management
6. Hedging, Insuring, & Diversifying
7. Risk & Reward
8. Forward & Future Prices
9. Options & Contingent Claims
10. Corporate Finance: Financing Decisions
Specific Course Information:
a) Course Delivery: The course will be taught using a face to face format. During class time, we will use discuss current events, elaborate on lecture material, and work HW problems to enforce course concepts. The delivery method may change as need warrants.
b) Instructional Method: Course content will be available through the eLC framework. Class time will be used to go over lecture material, work applied HW problems and discuss current events. Office hours will be held by the professor. We will use a combination of face to face office hours and Zoom office hours.
c) Principal course assignments: The field of finance is very broad, covering investments, corporate financial policy, security markets, banking and other intermediaries, the role of government and the international sector, and personal finance. In FINA 3000, we survey several of these key components of the financial system. The goal is for finance majors to have a strong background for their major courses, and for non-finance majors, the goal is to develop a set of finance tools that will be useful in future employment and daily life.
Course Outline:
d) Specific course requirements for grading purposes:
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OPTION I |
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OPTION II |
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2 Tests (100 points each) |
200 points |
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1 out of 2 Test (100 each) |
100 points |
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Daily CSePUB Check |
25 points |
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Daily CSePUB Check |
25 points |
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CSePUB HW |
75 points |
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CSePUB HW |
75 points |
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Final Exam |
0 points |
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Final Exam |
100 points |
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TOTAL POINTS |
300 points |
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TOTAL POINTS |
300 points |
TESTS:
The tests will be in-class and last 2 hours. The tests will be administered through ELC so please bring your laptops or tablets with you to class. Tests will not be cumulative, but the course builds on itself so be aware. If you are happy with your test scores, you may exempt the final exam. If you take the final, you will be graded under OPTION II. The final is cumulative.
Daily CSePub Check:
Each day, we will work example problems on CSePUB throughout lecture. These problems will serve as participation grades for Maymester. So, bring a laptop, Ipad, or smartphone to class each day. This grade component will count 6.25% of your total grade. Because attendance is not required, these problems will remain online and accessible until noon each day.
CSePUB HW
75 points out of the total 300 will come from assignments on the CSePUB website (see back of syllabus for registration information).
e) Grading policy
The final grade will be based on the total points earned on the material listed above, weighted as indicated. All students will be ranked by points earned and the final grade will be based on that ranking. Without any curves, the grades will be distributed as follows:
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Points Required for Each Grade: |
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A |
279 points |
C+ |
231 points |
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A- |
269 points |
C |
219 points |
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B+ |
261points |
C- |
208 points |
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B |
249 points |
D |
178 points |
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B- |
238 points |
F |
<178 points |
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Cutoffs may be lowered for different grades. They will not be raised. The amount that a cutoff is lowered will not be UNIFORM across all grades. For example, the cutoff for a D could be lowered while all the other cutoffs remain.
f) Attendance Policy
Attendance is not required for FINA 3000. The material in class builds from the first week, so missing class is not a good idea.
g) Required course material
· Course Bundle from CSePUB: Contents of the bundle include:
(1) Caspian Sea Drinks: A Narrative Introduction to Corporate Finance
(2) Introduction to Financial Management (e-text)
(3) Online Course Homework
· Financial or programmable calculator
h) Policy for make-up of examinations
There will be NO MAKEUP TESTS FOR ANY REASON. The weight from a missed test will be transferred to the final exam PROVIDING the absence is due to a serious illness, a family emergency or SOME university-sponsored events. If you expect to miss an exam for an approved reason, let me know as soon as possible prior to the exam. You must provide me with a formal written note regarding the situation – preferably before the exam – plus a phone call or note from a physician or other relevant person within one week following the missed exam.
i) DRC Testing Policy: Students who have accommodations registered with the DRC (Disability Resource Center) must provide verification to me at least one week prior to the first test. It is the responsibility of the student to make sure I receive this information in a timely manner. I will work with individual students to satisfy their verified accommodation needs.
j) Withdrawal Policy:
Students may withdraw from a course for any reason. The withdrawal period lasts from the day after drop and add until the withdrawal deadline. The exact dates for withdrawal can be seen on the parts of term page https://reg.uga.edu/general-information/calendars/parts-of-term/ . Once a withdrawal is processed for a course, the grade of W will be automatically assigned.
Contact Information:
Will Bost
Amos Hall B358
k) Communication and Website
Students are welcome to stop by my office during office hours or by appointment. I also respond to e-mail questions as quickly as possible. We have an eLC website for the course. The website will include the powerpoint slides that accompany the lectures, important notices, answers to problems discussed in class, and identification of materials of interest to the class. You are responsible for all information announced in class or posted on the website, including changes to the course syllabus and schedule.
INSTRUCTIONS FOR ACCESSING COURSE MATERIALS:
1. Visit www.csepub.com
2. Enter your class access code in the class access field. The code for our class this semester is 2d3d48a5.
3. Click “Apply Code.”
4. Click checkout and complete your purchase. Make sure you enter your UGA 810# where directed.
Other Useful Resources
News Sources provided to UGA students free of charge:
Wall Street Journal:
https://education.wsj.com/search-students/
Barron’s
https://partner.barrons.com/p/p_bie/enter-redemption-code/UOGT2rg5nd78
REQUIRED STATEMENTS FOR SYLLABUS
( https://curriculumsystems.uga.edu/curriculum/courses/syllabus/ )
UGA Student Honor Code: "I will be academically honest in all of my academic work and will not tolerate academic dishonesty of others." A Culture of Honesty, the University's policy and procedures for handling cases of suspected dishonesty, can be found at www.uga.edu/ovpi .
Lack of knowledge of the academic honesty policy is not a reasonable explanation for a violation. Questions related to course assignments and the academic honesty policy should be directed to the instructor.
My expectation with respect to what constitutes academic dishonesty is outlined in UGA’s Academic Honesty Policy:
https://honesty.uga.edu/_resources/documents/academic_honesty_policy_2017.pdf
The course syllabus is a general plan for the course; deviations announced to the class by the instructor may be necessary.
Mental Health and Wellness Resources:
· If you or someone you know needs assistance, you are encouraged to contact Student Care and Outreach in the Division of Student Affairs at 706-542-7774 or visit https://sco.uga.edu . They will help you navigate any difficult circumstances you may be facing by connecting you with the appropriate resources or services.
· UGA has several resources for a student seeking mental health services ( https://www.uhs.uga.edu/bewelluga/bewelluga ) or crisis support ( https://www.uhs.uga.edu/info/emergencies ).
· If you need help managing stress anxiety, relationships, etc., please visit BeWellUGA ( https://www.uhs.uga.edu/bewelluga/bewelluga ) for a list of FREE workshops, classes, mentoring, and health coaching led by licensed clinicians and health educators in the University Health Center.
· Additional resources can be accessed through the UGA App.
COVID Related Statements:
· If you are experiencing any symptoms associated with COVID, do not attend the f2f component of this class.
What do I do if I have symptoms - Students showing symptoms should self-isolate and schedule an appointment with the University Health Center by calling 706-542-1162 (Monday-Friday, 8 a.m.-5 p.m.). Please DO NOT walk-in. For emergencies and after-hours care, see https://www.uhs.uga.edu/info/emergencies.
What do I do if I am notified that I have been exposed? Students who learn they have been directly exposed to COVID-19 but are not showing symptoms should self-quarantine for 14 days consistent with Department of Public Health (DPH) and Centers for Disease Control and Prevention (CDC) guidelines. Please correspond with your instructor via email, with a cc: to Student Care & Outreach at [email protected], to coordinate continuing your coursework while self-quarantined. If you develop symptoms, you should contact the University Health Center to make an appointment to be tested. You should continue to monitor your symptoms daily on DawgCheck.
How do I get a test? Students who are demonstrating symptoms of COVID-19 should call the University Health Center. UHC is offering testing by appointment for students; appointments may be booked by calling 706-542-1162.
UGA will also be recruiting asymptomatic students to participate in surveillance tests. Students living in residence halls, Greek housing and off-campus apartment complexes are encouraged to participate.
What do I do if I test positive? Any student with a positive COVID-19 test is required to report the test in DawgCheck and should self-isolate immediately. Students should not attend classes in-person until the isolation period is completed. Once you report the positive test through DawgCheck, UGA Student Care and Outreach will follow up with you.
· Effective July 15, 2020, the University of Georgia—along with all University System of Georgia (USG) institutions—requires all faculty, staff, students and visitors to wear an appropriate face covering while inside campus facilities/buildings where six feet social distancing may not always be possible. Face covering use is in addition to and is not a substitute for social distancing. Anyone not using a face covering when required will be asked to wear one or must leave the area. Reasonable accommodations may be made for those who are unable to wear a face covering for documented health reasons. Students seeking an accommodation related to face coverings should contact Disability Services at https://drc.uga.edu/.
· COVID-19 Syllabus DawgCheck Statement - Please perform a quick symptom check each weekday on DawgCheck—on the UGA app or website—whether you feel sick or not. It will help health providers monitor the health situation on campus: https://dawgcheck.uga.edu/