Financial Management

The goal of this course is to offer knowledge to the students in relevance to the financial management decisions of corporations. Financial managers take regularly decisions which impact firm value and performance. They decide whether an investment is worthwhile and should be included in the firm’s investment budget. They will have to find the appropriate funding and calculate the cost of these funds. Additionally, the financial managers decide about the appropriate pay-out to stockholders. Financial operations also include the cash and leverage management so that the firm remains viable. All these decisions are made in the environment of asymmetric information which gives rise to conflicts of interest and agency costs. Students will be able to identify such circumstances. Moreover, the students will acquire knowledge of the functioning of the money and capital markets which permit financial decision makers to adjust risk and return of their portfolios.

The course starts with the development of the basic financial structures and capital market characteristics. Then students are exposed to the concepts of the time value of money, the relationship of risk and return and of the net preset value. Based on these theoretical and practical topics students will find out how to calculate the cost of capital and subsequently learn to evaluate investments, shares of stock and bonds. The approach will be that from the side of both investors and corporate managers.

The successful completion of the course, students will be sufficiently capable of:

• interpreting interest rate changes
• estimating the cost of funds and understanding the determinants of the cost of capital
• evaluating alternative investment projects
• estimating portfolio risk and return
• evaluating the value and performance of companies.
• identifying conflicts of interest agency problems and market frictions