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Corporate Finance

Module description

This module is intended for students who are looking to develop a sound knowledge in making investment and financial management decision which plays a central role in corporate profitability and performance. The module covers capital budgeting, assessment of capital investments and practical techniques to estimate a company’s or project’s cost of capital. An overview of corporate governance is presented along with a framework for understanding and analysing corporate governance and stakeholder management. The growing impact of environmental and social consideration in investing is also highlighted in this module.

Module aims - intentions of the module

This module is designed to introduce you to corporate finance theory and enable you to apply it to the main problems faced by financial managers and corporate decision makers. In particular, this module provides a thorough treatment of the key aspects in the financial decision-making process in a corporation, including market efficiency, risk and return, portfolio theory and risk management. You should be able to evaluate a company’s corporate governance, analyse a capital budgeting problem, estimate a company’s cost of capital and evaluate a company’s operating and financial leverage and its working capital management.

The module introduces the concept of a portfolio approach to investments. The needs of individual and institutional investors are each examined, along with the range of available investment solutions. You will be able to demonstrate the use of fundamentals of portfolio and risk management, including return and risk measurement, and portfolio planning and construction. You will compare and contrast the types of investment management products that are available to investors and apply them to the portfolio approach.

This module takes a broad approach to address both the risk management of organisations in general and portfolio risk management. Good governance practices are introduced, in particular investment approaches that consider environmental, social and governance factors, known as ESG. This module enables you to reflect how companies manage their relationships with stakeholders and highlights the risks and benefits that underlie a corporate governance structure.

Intended Learning Outcomes (ILOs)

ILO: Module-specific skills

On successfully completing the module you will be able to...

• 1. Describe the capital budgeting process and distinguish among the various categories of capital projects
• 2. Calculate and interpret measures of operating leverage and financial leverage
• 3. Apply methods of evaluating the effectiveness of working capital management
• 4. Demonstrate the use of fundamentals of portfolio and risk management
• 5. Describe methods for measuring and modifying risk exposures
• 6. Describe factors relevant to the analysis of corporate governance and stakeholder management
• 7. Explain how environmental, social and governance factors may be used in investment analysis

ILO: Discipline-specific skills

On successfully completing the module you will be able to...

• 8. Identify corporate governance issues relevant for investment professionals and conflict of interests that exist among stakeholder groups
• 9. Evaluate the implications of ESG considerations in investment decision making
• 10. Apply the portfolio planning and construction process in a real-world context

ILO: Personal and key skills

On successfully completing the module you will be able to...

• 11. Develop a sound knowledge of the investment management products, and their features and benefits, relevant to your role
• 12. Understand the impact the external environment has on Financial Services as appropriate to your role, together with relevant best practice
• 13. Manage and coordinate several tasks within the organisation

Syllabus plan

• Capital budgeting
• Cost of capital
• Measures of leverage
• Working capital management
• Portfolio management: an overview
• Risk management: an introduction
• Portfolio risk and return part I
• Portfolio risk and return part II
• Basics of portfolio planning and construction
• Corporate governance and environmental, social and governance (ESG)

Learning activities and teaching methods (given in hours of study time)

Details of learning activities and teaching methods

Formative assessment

Summative assessment (% of credit)

Details of summative assessment

Details of re-assessment (where required by referral or deferral)

Re-assessment notes

Deferral – if you miss an assessment for certificated reasons judged acceptable by the Mitigation Committee, you will normally be either deferred in the assessment or an extension may be granted. The mark given for a re-assessment taken as a result of deferral will not be capped and will be treated as it would be if it were your first attempt at the assessment.

Referral – if you have failed the module overall (i.e., a final overall module mark of less than 40%) you will be required to submit a further assessment. The mark given for a re-assessment taken as a result of referral will count for 100% of the final mark and will be capped at 40%.

Indicative learning resources - Basic reading

• Corporate Finance and Portfolio Management, CFA® Program Curriculum Level I Volume 4, CFA Institute.
• Brealey, R.A. Myers, S.C. and Allen F. (2008), Principles of Corporate Finance, 9th (International) Edition, London: McGraw-Hill.
• Hillier, D. Ross, S. Westerfield, R. Jaffe, J. and Jordan, B. Corporate Finance 2013. 2nd Ed. McGraw Hill.

Indicative learning resources - Web based and electronic resources

https://vle.exeter.ac.uk/

Key words search

Corporate finance