FIN 6301 Unit V DB

FIN 6301, Corporate Finance 1

Course Learning Outcomes for Unit V At the end of this unit, you should be able to:

5. Recommend financial planning techniques to determine corporate value. 5.1 Discuss a company’s cash conversion cycle and cash management techniques. 5.2 Explain how a company can use planning techniques to forecast operations. 5.3 Examine internal controls a corporation can use to ensure its operations run smoothly and

ethically.

Required Unit Resources Chapter 11: Cash Flow Estimation and Risk Analysis (ULO 5.1) Read from section 11-1 through section 11-9. The purpose of this chapter is to understand cash flow estimation and risk analysis. First, we identify the relevant cash flows for a project evaluation and determine the value of an expansion project. Next, we apply risk analysis to potential projects using the major types of risk analysis techniques. We compare and evaluate the different methods of sensitivity analysis and explain how to conduct a Monte Carlo simulation analysis. Finally, we assess a project’s qualitative impact, conclude whether equipment should be replaced, and use decision trees to discuss real options. Chapter 12: Corporate Valuation and Financial Planning (ULO 5.2) Read from section 12-1 through section 12-7. The purpose of this chapter is to understand corporate valuation and financial planning. First, we identify differences between an operating plan and a financial plan by listing some uses of an operating plan and a financial plan. Next, we explain how ratios are used to forecast operations and conduct a model to forecast operating activities. We estimate all projected items on a set of financial statements and create different scenarios for evaluating strategic plans. Finally, we develop a model of financial statements that includes financing feedback, uses the additional funds needed (AFN) model, and incorporates inputs that change over time. Chapter 13: Corporate Governance (ULO 5.3) Read from section 13-1 through section 13-3. The purpose of this chapter is to understand corporate governance. First, we will explain how debt covenants can reduce agency costs and identify agency costs between inside shareholders and outside shareholders. We will summarize the sources of conflict between managers and shareholders as well as discuss the monitoring and discipline by the board of directors on an organization. Next, we will analyze the effects of charter provisions to prevent hostile takeovers and environmental factors outside a firm’s control. Finally, we will address internal controls and employee stock ownership plans (ESOPs).

Unit Lesson Lesson: Mastering the Fundamentals of Corporate Finance (ULOs 5.1, 5.2, and 5.3) In today’s ever-evolving business landscape, understanding the core principles of corporate finance is not just a necessity—it is a cornerstone for success. From accurately estimating cash flows and navigating the complexities of corporate governance to strategizing financial plans and valuation, these insights pave the way for informed decision-making and long-term business sustainability. Dive deep into these essential topics and equip yourself with the knowledge to drive your organization's financial health and strategic vision.

UNIT V STUDY GUIDE

Corporate Valuation and Governance

FIN 6301, Corporate Finance 2

UNIT x STUDY GUIDE

Title

Understanding Cash Flow Estimation and Risk Analysis in Corporate Finance One of the most fundamental components in corporate finance is the ability to effectively estimate cash flows. It serves as the lifeline of a business, driving critical decisions from day-to-day operations to strategic expansions. Coupled with this is the necessity of understanding the risks involved. As we delve deeper into this realm, we will explore how to accurately identify and evaluate cash flows, apply risk analysis, and make informed decisions based on qualitative and quantitative factors. Identifying Relevant Cash Flows for Project Evaluation A crucial step in the project evaluation process is distinguishing between the cash flows that are relevant to the decision at hand and those that are not. Understanding the incremental cash flows, which represent the additional cash flows a company can expect as a result of accepting a project, is essential. We should also factor in issues such as sunk costs, opportunity costs, and the effects of inflation. Value of an Expansion Project When considering an expansion project, a company must look at the potential increase in revenues and costs. The net present value (NPV) of these cash flows, discounted at the company’s cost of capital, can offer insight into the project's viability. Additionally, it is vital to consider both the direct and indirect benefits, including potential market share gains or the strategic positioning that could result from the expansion (Probasco, 2022). Risk Analysis Techniques Projects inherently come with risks. By employing risk analysis techniques, a company can foresee potential challenges and develop strategies to mitigate them. Sensitivity analysis allows businesses to understand how different variables affect the project’s outcome. Monte Carlo simulation, on the other hand, uses probability distributions and random sampling to assess various outcomes and their likelihoods, providing a comprehensive risk profile ( U.S. Environmental Protection Agency, n.d.). Evaluating Sensitivity Analysis Methods There exist different methods to carry out sensitivity analysis, each with its strengths and drawbacks. Whether one is using the one-variable-at-a-time method or examining multiple variables simultaneously, it is critical to determine which method is most suitable for the project’s specific needs and the nature of the data available (BDC, n.d.). Qualitative Impact Assessment While numbers and quantitative analysis are foundational, qualitative factors like a project’s impact on company reputation, alignment with long-term strategy, or potential environmental implications should never be overlooked. Such nonmonetary factors can have long-term consequences and should be integrated into the decision-making process. Equipment Replacement Decisions Deciding whether to replace equipment involves a combination of understanding the existing equipment’s remaining useful life, the potential benefits of newer equipment, and the associated costs. It is not merely about direct costs but also the indirect implications, such as increased efficiency or reduced downtime with new equipment (Hastings, 2021). Real Options and Decision Trees Lastly, the concept of real options allows companies to make decisions based on future uncertainties, providing flexibility in their strategic planning. Using decision trees can visualize these options, outlining potential paths and the associated risks and rewards, facilitating more informed and adaptable decisions.

FIN 6301, Corporate Finance 3

UNIT x STUDY GUIDE

Title

Estimating cash flows and understanding associated risks are paramount in corporate finance. With the tools and techniques discussed, professionals can make informed decisions that maximize value and align with both short-term and long-term strategic goals.

Diving into Corporate Valuation and Strategic Financial Planning The financial health and strategic direction of a company often hinge on the understanding and application of corporate valuation and financial planning. It is not just about the current value of a company but also how to plan its financial future. This lesson will guide you through the intricate dance of valuation, financial plans, forecasting, and scenario evaluation. Operating Plan Versus Financial Plan At the heart of any business strategy lie two distinct plans: the operating plan and the financial plan. While both are intrinsically connected, they serve different purposes:

Forecasting with Ratios Ratios, particularly financial ratios, play a pivotal role in forecasting operations. By examining the relationships between different financial metrics, such as liquidity ratios or profitability ratios, one can glean insights into the company’s operational trends and make informed predictions about future performance (Boyles, 2022). Modeling Operating Activities Crafting a model to forecast operating activities involves incorporating a variety of data points. These include historical trends, current market conditions, and projections based on new initiatives or changes in the industry. Such models can help in estimating all projected items on a set of financial statements, ensuring a holistic view of the company’s potential performance. Scenario Evaluation for Strategic Plans Strategic planning is about not having a single pathway, instead, but multiple scenarios, each with its merits and challenges. By creating and evaluating different scenarios, a company can be better prepared for

• This plan outlines the day-to-day operations of the business. It encompasses production schedules, inventory management, workforce planning, and other aspects of the company's core operations (The Alternative Board, 2021).

Operating Plan

• Going beyond daily operations, the financial plan lays out the fiscal strategy. It involves budgeting, forecasting revenues and expenses, investment plans, and strategies for managing company finances, both short-term and long-term (Indeed Editorial Team, 2023a).

Financial Plan

FIN 6301, Corporate Finance 4

UNIT x STUDY GUIDE

Title

uncertainties, pivoting their strategies based on real-time conditions and ensuring continued growth and stability. Incorporating Financing Feedback A comprehensive model of financial statements not only accounts for the company’s operational and financial strategies but also integrates financing feedback. Understanding how financing decisions feed back into operations and overall strategy is crucial for holistic financial planning. The AFN (Additional Funds Needed) Model Determining how much additional capital a company might need for its growth plans is where the AFN model comes into play. It helps in pinpointing the extra funds required based on projected increases in assets and spontaneous liabilities relative to a firm's sales increase. Inputs that Change Over Time The financial landscape is dynamic. For a model to remain relevant, it needs to be adaptable, incorporating inputs that change over time. This includes variables such as inflation rates, interest rates, and market demand, which can fluctuate and have profound impacts on financial projections. Corporate valuation and financial planning are intertwined disciplines that drive a company’s strategic direction. With a strong grasp of the principles discussed, professionals are better equipped to guide their organizations toward sustainable growth and success.

Navigating the Intricacies of Corporate Governance Corporate governance is more than just a buzzword; it is a foundational pillar that ensures businesses function efficiently, ethically, and transparently. By establishing a clear framework for roles, responsibilities, and accountability, effective corporate governance can safeguard a company’s longevity and reputation. Today, we will journey through the different aspects of corporate governance, understanding their implications and relevance in the modern business landscape. Agency Costs and Debt Covenants A fundamental aspect of corporate governance is managing agency costs. These arise due to the inherent conflicts of interest between shareholders (principals) and those who manage the company (agents). Debt covenants can be instrumental in mitigating such costs. These contractual agreements in debt contracts can restrict managers’ actions, ensuring they act in the best interest of debt holders and, by extension, shareholders (Guay, 2008). Agency Costs: Inside Versus Outside Shareholders Not all shareholders are created equal. There exists a potential friction between inside shareholders, those involved in managing or running the company, and outside shareholders. While insiders might have more information, outsiders can often bring a fresh perspective, and managing the agency costs between these groups is pivotal (Carlson, 2020). Sources of Conflict: Managers and Shareholders Diverging interests between managers and shareholders can lead to conflicts. Managers might prioritize short-term gains, like bonuses, over the company’s long-term health. Recognizing and addressing these conflicts proactively is a key component of effective corporate governance (Ivanov, 2023).

FIN 6301, Corporate Finance 5

UNIT x STUDY GUIDE

Title

The Role of the Board of Directors Serving as a company’s watchdog, the board of directors plays a crucial role in monitoring and disciplining an organization's management. By ensuring the interests of the shareholders are always at the forefront, the board can be instrumental in guiding a company’s strategic direction and ethical stance. Charter Provisions and Hostile Takeovers Corporate charters can be equipped with provisions to prevent hostile takeovers. These measures protect a company from being acquired against its will, thereby ensuring that its vision and mission remain uncompromised. Environmental Factors Outside a Firm’s Control Sometimes, forces outside a company’s control, such as economic downturns, regulatory changes, or global crises, can significantly impact its operations. Effective corporate governance ensures that a company is resilient and adaptable in the face of such challenges (Indeed Editorial Team, 2023-b). Internal Controls The mechanisms and processes implemented by a company to ensure its operations run smoothly and ethically are its internal controls. From financial audits to human resources policies, these controls are the unsung heroes maintaining the company's integrity (RiskOptics, 2022). Employee Stock Ownership Plans (ESOPs) ESOPs are not only compensation tools but are also a means to align employees’ interests with those of the shareholders. By giving employees a stake in the company, ESOPs can motivate them to work toward the company’s overall success (Muniz, 2021). Corporate governance, with its multifaceted elements, ensures a balance between the diverse interests within a company. By embracing good governance practices, businesses can not only thrive financially but also ethically, creating a legacy of trust and success.

References The Alternative Board. (2020, February 27). What an operating plan is and why you absolutely need one.

https://www.thealternativeboard.com/blog/operating-plan BDC. (n.d.). How to complete a sensitivity analysis. https://www.bdc.ca/en/articles-tools/money-

finance/manage-finances/how-complete-sensitivity-analysis Boyles, M. (2022, June 21). 7 financial forecasting methods to predict business performance. Harvard

Business School Online. https://online.hbs.edu/blog/post/financial-forecasting-methods Carlson, R. (2020, September 17). What is agency cost? The Balance.

https://www.thebalancemoney.com/what-is-the-agency-cost-for-business-392845 Guay, W. R. (2008). Conservative financial reporting, debt covenants, and the agency costs of debt. Journal

of Accounting and Economics, 45(2–3), 175–180. https://doi.org/10.1016/j.jacceco.2008.05.001 Hastings, N. A. J. (2021). Equipment replacement decisions. In Physical Asset Management (pp. 543–566).

Springer. https://doi.org/10.1007/978-3-030-62836-9_26 Indeed Editorial Team. (2023a). 9 basic elements of a financial plan (plus creation tips). Indeed.com.

https://www.indeed.com/career-advice/career-development/financial-plan-elements

FIN 6301, Corporate Finance 6

UNIT x STUDY GUIDE

Title

Indeed Editorial Team. (2023b). 9 external environment factors that affect business. Indeed.com. https://www.indeed.com/career-advice/career-development/external-environment-factors

Ivanov, V. (2023, January 10). Solving the manager versus shareholder dilemma: 5 strategies for finding

common ground. Forbes. https://www.forbes.com/sites/forbesfinancecouncil/2023/01/10/solving-the- manager-versus-shareholder-dilemma-5-strategies-for-finding-common-ground/?sh=6ee29e6d561b

Muniz, J. (2021). Five advantages of employee stock ownership plans (ESOPs). FORVIS.

https://www.forvis.com/article/2021/01/five-advantages-employee-stock-ownership-plans-esops Nguyen, T. T. H., Wong, W.-K., Phan, G. Q., Tran, D. T. M., & Moslehpour, M. (2021, September). Corporate

valuation spurred by information transparency in an emerging economy. Annals of Financial Economics, 16(3), 1–21. https://libraryresources.columbiasouthern.edu/login?url=https://search.ebscohost.com/login.aspx?dire ct=true&db=bsu&AN=154894909&site=ehost-live&scope=site

Probasco, J. (2021, October 20). Net present value: One way to determine the viability of an investment.

Business Insider India. https://www.businessinsider.com/personal-finance/npv RiskOptics. (2022, June 17). What is the importance of internal controls in corporate governance

mechanisms? https://reciprocity.com/blog/the-importance-of-internal-controls-in-corporate- governance-mechanisms

U.S. Environmental Protection Agency. (n.d.). Use of Monte Carlo simulation in risk assessments.

https://www.epa.gov/risk/use-monte-carlo-simulation-risk-assessments

Suggested Unit Resources Article: Corporate Valuation Spurred by Information Transparency in an Emerging Economy (Optional) This article looks at corporate information transparency and proposes a model for dealing with problems of crash risk and stock prices to enhance governance (22 pages).

FIN 6301, Corporate Finance 1

Course Learning Outcomes for Unit V At the end of this unit, you should be able to:

5. Recommend financial planning techniques to determine corporate value. 5.1 Discuss a company’s cash conversion cycle and cash management techniques. 5.2 Explain how a company can use planning techniques to forecast operations. 5.3 Examine internal controls a corporation can use to ensure its operations run smoothly and

ethically.

Required Unit Resources Chapter 11: Cash Flow Estimation and Risk Analysis (ULO 5.1) Read from section 11-1 through section 11-9. The purpose of this chapter is to understand cash flow estimation and risk analysis. First, we identify the relevant cash flows for a project evaluation and determine the value of an expansion project. Next, we apply risk analysis to potential projects using the major types of risk analysis techniques. We compare and evaluate the different methods of sensitivity analysis and explain how to conduct a Monte Carlo simulation analysis. Finally, we assess a project’s qualitative impact, conclude whether equipment should be replaced, and use decision trees to discuss real options. Chapter 12: Corporate Valuation and Financial Planning (ULO 5.2) Read from section 12-1 through section 12-7. The purpose of this chapter is to understand corporate valuation and financial planning. First, we identify differences between an operating plan and a financial plan by listing some uses of an operating plan and a financial plan. Next, we explain how ratios are used to forecast operations and conduct a model to forecast operating activities. We estimate all projected items on a set of financial statements and create different scenarios for evaluating strategic plans. Finally, we develop a model of financial statements that includes financing feedback, uses the additional funds needed (AFN) model, and incorporates inputs that change over time. Chapter 13: Corporate Governance (ULO 5.3) Read from section 13-1 through section 13-3. The purpose of this chapter is to understand corporate governance. First, we will explain how debt covenants can reduce agency costs and identify agency costs between inside shareholders and outside shareholders. We will summarize the sources of conflict between managers and shareholders as well as discuss the monitoring and discipline by the board of directors on an organization. Next, we will analyze the effects of charter provisions to prevent hostile takeovers and environmental factors outside a firm’s control. Finally, we will address internal controls and employee stock ownership plans (ESOPs).

Unit Lesson Lesson: Mastering the Fundamentals of Corporate Finance (ULOs 5.1, 5.2, and 5.3) In today’s ever-evolving business landscape, understanding the core principles of corporate finance is not just a necessity—it is a cornerstone for success. From accurately estimating cash flows and navigating the complexities of corporate governance to strategizing financial plans and valuation, these insights pave the way for informed decision-making and long-term business sustainability. Dive deep into these essential topics and equip yourself with the knowledge to drive your organization's financial health and strategic vision.

UNIT V STUDY GUIDE

Corporate Valuation and Governance

FIN 6301, Corporate Finance 2

UNIT x STUDY GUIDE

Title

Understanding Cash Flow Estimation and Risk Analysis in Corporate Finance One of the most fundamental components in corporate finance is the ability to effectively estimate cash flows. It serves as the lifeline of a business, driving critical decisions from day-to-day operations to strategic expansions. Coupled with this is the necessity of understanding the risks involved. As we delve deeper into this realm, we will explore how to accurately identify and evaluate cash flows, apply risk analysis, and make informed decisions based on qualitative and quantitative factors. Identifying Relevant Cash Flows for Project Evaluation A crucial step in the project evaluation process is distinguishing between the cash flows that are relevant to the decision at hand and those that are not. Understanding the incremental cash flows, which represent the additional cash flows a company can expect as a result of accepting a project, is essential. We should also factor in issues such as sunk costs, opportunity costs, and the effects of inflation. Value of an Expansion Project When considering an expansion project, a company must look at the potential increase in revenues and costs. The net present value (NPV) of these cash flows, discounted at the company’s cost of capital, can offer insight into the project's viability. Additionally, it is vital to consider both the direct and indirect benefits, including potential market share gains or the strategic positioning that could result from the expansion (Probasco, 2022). Risk Analysis Techniques Projects inherently come with risks. By employing risk analysis techniques, a company can foresee potential challenges and develop strategies to mitigate them. Sensitivity analysis allows businesses to understand how different variables affect the project’s outcome. Monte Carlo simulation, on the other hand, uses probability distributions and random sampling to assess various outcomes and their likelihoods, providing a comprehensive risk profile ( U.S. Environmental Protection Agency, n.d.). Evaluating Sensitivity Analysis Methods There exist different methods to carry out sensitivity analysis, each with its strengths and drawbacks. Whether one is using the one-variable-at-a-time method or examining multiple variables simultaneously, it is critical to determine which method is most suitable for the project’s specific needs and the nature of the data available (BDC, n.d.). Qualitative Impact Assessment While numbers and quantitative analysis are foundational, qualitative factors like a project’s impact on company reputation, alignment with long-term strategy, or potential environmental implications should never be overlooked. Such nonmonetary factors can have long-term consequences and should be integrated into the decision-making process. Equipment Replacement Decisions Deciding whether to replace equipment involves a combination of understanding the existing equipment’s remaining useful life, the potential benefits of newer equipment, and the associated costs. It is not merely about direct costs but also the indirect implications, such as increased efficiency or reduced downtime with new equipment (Hastings, 2021). Real Options and Decision Trees Lastly, the concept of real options allows companies to make decisions based on future uncertainties, providing flexibility in their strategic planning. Using decision trees can visualize these options, outlining potential paths and the associated risks and rewards, facilitating more informed and adaptable decisions.

FIN 6301, Corporate Finance 3

UNIT x STUDY GUIDE

Title

Estimating cash flows and understanding associated risks are paramount in corporate finance. With the tools and techniques discussed, professionals can make informed decisions that maximize value and align with both short-term and long-term strategic goals.

Diving into Corporate Valuation and Strategic Financial Planning The financial health and strategic direction of a company often hinge on the understanding and application of corporate valuation and financial planning. It is not just about the current value of a company but also how to plan its financial future. This lesson will guide you through the intricate dance of valuation, financial plans, forecasting, and scenario evaluation. Operating Plan Versus Financial Plan At the heart of any business strategy lie two distinct plans: the operating plan and the financial plan. While both are intrinsically connected, they serve different purposes:

Forecasting with Ratios Ratios, particularly financial ratios, play a pivotal role in forecasting operations. By examining the relationships between different financial metrics, such as liquidity ratios or profitability ratios, one can glean insights into the company’s operational trends and make informed predictions about future performance (Boyles, 2022). Modeling Operating Activities Crafting a model to forecast operating activities involves incorporating a variety of data points. These include historical trends, current market conditions, and projections based on new initiatives or changes in the industry. Such models can help in estimating all projected items on a set of financial statements, ensuring a holistic view of the company’s potential performance. Scenario Evaluation for Strategic Plans Strategic planning is about not having a single pathway, instead, but multiple scenarios, each with its merits and challenges. By creating and evaluating different scenarios, a company can be better prepared for

• This plan outlines the day-to-day operations of the business. It encompasses production schedules, inventory management, workforce planning, and other aspects of the company's core operations (The Alternative Board, 2021).

Operating Plan

• Going beyond daily operations, the financial plan lays out the fiscal strategy. It involves budgeting, forecasting revenues and expenses, investment plans, and strategies for managing company finances, both short-term and long-term (Indeed Editorial Team, 2023a).

Financial Plan

FIN 6301, Corporate Finance 4

UNIT x STUDY GUIDE

Title

uncertainties, pivoting their strategies based on real-time conditions and ensuring continued growth and stability. Incorporating Financing Feedback A comprehensive model of financial statements not only accounts for the company’s operational and financial strategies but also integrates financing feedback. Understanding how financing decisions feed back into operations and overall strategy is crucial for holistic financial planning. The AFN (Additional Funds Needed) Model Determining how much additional capital a company might need for its growth plans is where the AFN model comes into play. It helps in pinpointing the extra funds required based on projected increases in assets and spontaneous liabilities relative to a firm's sales increase. Inputs that Change Over Time The financial landscape is dynamic. For a model to remain relevant, it needs to be adaptable, incorporating inputs that change over time. This includes variables such as inflation rates, interest rates, and market demand, which can fluctuate and have profound impacts on financial projections. Corporate valuation and financial planning are intertwined disciplines that drive a company’s strategic direction. With a strong grasp of the principles discussed, professionals are better equipped to guide their organizations toward sustainable growth and success.

Navigating the Intricacies of Corporate Governance Corporate governance is more than just a buzzword; it is a foundational pillar that ensures businesses function efficiently, ethically, and transparently. By establishing a clear framework for roles, responsibilities, and accountability, effective corporate governance can safeguard a company’s longevity and reputation. Today, we will journey through the different aspects of corporate governance, understanding their implications and relevance in the modern business landscape. Agency Costs and Debt Covenants A fundamental aspect of corporate governance is managing agency costs. These arise due to the inherent conflicts of interest between shareholders (principals) and those who manage the company (agents). Debt covenants can be instrumental in mitigating such costs. These contractual agreements in debt contracts can restrict managers’ actions, ensuring they act in the best interest of debt holders and, by extension, shareholders (Guay, 2008). Agency Costs: Inside Versus Outside Shareholders Not all shareholders are created equal. There exists a potential friction between inside shareholders, those involved in managing or running the company, and outside shareholders. While insiders might have more information, outsiders can often bring a fresh perspective, and managing the agency costs between these groups is pivotal (Carlson, 2020). Sources of Conflict: Managers and Shareholders Diverging interests between managers and shareholders can lead to conflicts. Managers might prioritize short-term gains, like bonuses, over the company’s long-term health. Recognizing and addressing these conflicts proactively is a key component of effective corporate governance (Ivanov, 2023).

FIN 6301, Corporate Finance 5

UNIT x STUDY GUIDE

Title

The Role of the Board of Directors Serving as a company’s watchdog, the board of directors plays a crucial role in monitoring and disciplining an organization's management. By ensuring the interests of the shareholders are always at the forefront, the board can be instrumental in guiding a company’s strategic direction and ethical stance. Charter Provisions and Hostile Takeovers Corporate charters can be equipped with provisions to prevent hostile takeovers. These measures protect a company from being acquired against its will, thereby ensuring that its vision and mission remain uncompromised. Environmental Factors Outside a Firm’s Control Sometimes, forces outside a company’s control, such as economic downturns, regulatory changes, or global crises, can significantly impact its operations. Effective corporate governance ensures that a company is resilient and adaptable in the face of such challenges (Indeed Editorial Team, 2023-b). Internal Controls The mechanisms and processes implemented by a company to ensure its operations run smoothly and ethically are its internal controls. From financial audits to human resources policies, these controls are the unsung heroes maintaining the company's integrity (RiskOptics, 2022). Employee Stock Ownership Plans (ESOPs) ESOPs are not only compensation tools but are also a means to align employees’ interests with those of the shareholders. By giving employees a stake in the company, ESOPs can motivate them to work toward the company’s overall success (Muniz, 2021). Corporate governance, with its multifaceted elements, ensures a balance between the diverse interests within a company. By embracing good governance practices, businesses can not only thrive financially but also ethically, creating a legacy of trust and success.

References The Alternative Board. (2020, February 27). What an operating plan is and why you absolutely need one.

https://www.thealternativeboard.com/blog/operating-plan BDC. (n.d.). How to complete a sensitivity analysis. https://www.bdc.ca/en/articles-tools/money-

finance/manage-finances/how-complete-sensitivity-analysis Boyles, M. (2022, June 21). 7 financial forecasting methods to predict business performance. Harvard

Business School Online. https://online.hbs.edu/blog/post/financial-forecasting-methods Carlson, R. (2020, September 17). What is agency cost? The Balance.

https://www.thebalancemoney.com/what-is-the-agency-cost-for-business-392845 Guay, W. R. (2008). Conservative financial reporting, debt covenants, and the agency costs of debt. Journal

of Accounting and Economics, 45(2–3), 175–180. https://doi.org/10.1016/j.jacceco.2008.05.001 Hastings, N. A. J. (2021). Equipment replacement decisions. In Physical Asset Management (pp. 543–566).

Springer. https://doi.org/10.1007/978-3-030-62836-9_26 Indeed Editorial Team. (2023a). 9 basic elements of a financial plan (plus creation tips). Indeed.com.

https://www.indeed.com/career-advice/career-development/financial-plan-elements

FIN 6301, Corporate Finance 6

UNIT x STUDY GUIDE

Title

Indeed Editorial Team. (2023b). 9 external environment factors that affect business. Indeed.com. https://www.indeed.com/career-advice/career-development/external-environment-factors

Ivanov, V. (2023, January 10). Solving the manager versus shareholder dilemma: 5 strategies for finding

common ground. Forbes. https://www.forbes.com/sites/forbesfinancecouncil/2023/01/10/solving-the- manager-versus-shareholder-dilemma-5-strategies-for-finding-common-ground/?sh=6ee29e6d561b

Muniz, J. (2021). Five advantages of employee stock ownership plans (ESOPs). FORVIS.

https://www.forvis.com/article/2021/01/five-advantages-employee-stock-ownership-plans-esops Nguyen, T. T. H., Wong, W.-K., Phan, G. Q., Tran, D. T. M., & Moslehpour, M. (2021, September). Corporate

valuation spurred by information transparency in an emerging economy. Annals of Financial Economics, 16(3), 1–21. https://libraryresources.columbiasouthern.edu/login?url=https://search.ebscohost.com/login.aspx?dire ct=true&db=bsu&AN=154894909&site=ehost-live&scope=site

Probasco, J. (2021, October 20). Net present value: One way to determine the viability of an investment.

Business Insider India. https://www.businessinsider.com/personal-finance/npv RiskOptics. (2022, June 17). What is the importance of internal controls in corporate governance

mechanisms? https://reciprocity.com/blog/the-importance-of-internal-controls-in-corporate- governance-mechanisms

U.S. Environmental Protection Agency. (n.d.). Use of Monte Carlo simulation in risk assessments.

https://www.epa.gov/risk/use-monte-carlo-simulation-risk-assessments

Suggested Unit Resources Article: Corporate Valuation Spurred by Information Transparency in an Emerging Economy (Optional) This article looks at corporate information transparency and proposes a model for dealing with problems of crash risk and stock prices to enhance governance (22 pages).