King Abdulaziz University Faculty of Economics and Administration Department of Finance Foundations of Finance (FIN230) Syllabus, Second Semester-1434/1435 (Spring 2013/2014) Course Details Course Title CODE/NO Prerequisites Credits Foundations of Finance FIN 230 ACCT 117&213 3 credit hrs Teaching Team Team Members Dr. Khadija Harery Dr. Saima Javaid Dr. Suha Alalawi Teaching section Class Room Class Time Co-ordinator of the course VAR 108 (Buld 420) DAR 209 (Buld 420) S.T.Th 12-12:50 9:30-11 Office Hours S.T.Th. 9-1 11-1 S.T.Th. 9-11 11-1 S.T.Th. 9-12 11-12 Phone &Room EX:26487 Rm.2224 EX: Rm.2222 Rm.2224 E.mail harery3000 @yahoo.com dr.saimajavaid @gmail.com suha_alalawi @hotmail.co.uk Department of Finance 1
Course Description The field of finance integrates concepts from economics, accounting, and a number of other business and finance field. This course will introduce finance via conceptual thinking, basic financial analysis, financial calculations and capital markets. It provides also an insight among the students regarding the financial aspects and issues of an organization. It emphasizes how different ratios and different accounting statements help the finance managers in taking logical and rational decision systematically. Course Objectives The main objectives of this course are: 1. The main objective of this course is to develop a foundation of financial management concepts. 2. Understanding the Role of financial management within the framework of other internal functional areas. 3. Help future managers to understand how the companies finance works and how to face financial problems. 4. Know Risk - Return Trade off and integrating the Goals and Roles of Financial Managers. 5. Develop investing, financing and real asset management strategies for effective managerial decision making. 6. Know Ratio Analysis, its importance and application. 7. Perform Financial Forecasting, Financial and Operating leverage and Break-even Analysis in a firm s strategic growth. 8. Provide the students with the ability to develop and analyze the financial markets and its instruments. 9. Develop the ability to evaluate the investment proposal and a thorough understanding and application of the Capital Budgeting Process and its Techniques. Course Outcomes At the end of this course, students should be expected to achieve the following points: 1. Knowledge of the various objectives and functions of financial management. 2. Understand the relationship between Finance, Economics and Accounting. 3. Enable students to understand how corporations make important investment and financing decisions. 4. Understand and explain the Risk and Return Trade off. 5. Relate the previous knowledge of accounting into financial decision-making. 6. Calculation of different types of Ratios and make Financial decisions. 7. Build the student ability to plan ahead and make necessary adjustments before actual event occur in the company by constructing Pro Forma Statements. 8. Calculation and Knowledge of operating and financial leverage and Break-even Analysis. 9. Knowing the concept of Time Value of Money. 10. Knowing the Valuation Concept of the Securities and Bonds and their application. 11. Understand the Idea of the Cost of Capital and how to Calculate it. 12. Comprehend, analyze and apply the Financial Ratios in context of Saudi Arabia and communicate effectively. Department of Finance 2
Method of Teaching and Learning 1. Class contact hours will include both lecture and discussion. 2. Pre-reading is required for each class and class participation 3. Class participation by using the I Pod, I phone system or note book to connect to the web (Inter active learning). 4. Financial issues and terms are analyzed through case studies, exercises and practical problems. 5. Current examples are used to illustrate learning points. 6. Using specific Financial Site for preparation and searching. 7. Students will be expected to make use of online learning resources and published material. 8. Students are expected to work in groups, co-ordinate their efforts with leadership skills. Course By-Laws 1. Attendance of classes is very important to grasp the subjects. 2. Respect the time of the lecture. 3. Time of the lecture is valuable as Money. 4. Reading and studying from the book is very important. 5. Do not depend on the Power Point only. 6. Reading and preparing before class will facilitate your understanding. 7. Official emails are important for communication. 8. Calculators are a must to have always especially at the Exam time. 9. No mobiles are allowed to be used as calculators during Exams. 10. Written Calculations are very important at Exams even if it is MCQ. 11. Cheating at the Exams cause Flunking the Course. 12. No Make- Up Exams except in case of severe illness or death of close family. 13. Mobiles should be Silent at lecture time. Assessment Methods 1. Emphasis is given on the continuous assessment of students over-all performance and enhancement of his/her skills. 2. They are expected to work in groups as a team, their leadership skill will be assessed and their communication abilities are assessed during the whole semester through interaction and classroom discussion. 3. Also, other personality traits will be assessed during the Power-Point Presentation of their group work (Project). 4. Course assessment will take the form of written examination (mid-terms and final), assignments/homework, Power-point presentation and exercises. 5. The distribution of marks are as follow; A. Exams a. First Mid -Term (20%) b. Second Mid-Term (20%) Department of Finance 3
c. Final (30%) B. Extra-Curricular Activities (Group project: Financial Ratio analysis of Saudi Company and Power-Point Presentation) (15%) C. Class discussion and participation is very important (10%). D. Problem Solving (5%) Text Book Corporate Finance Foundation, by Hirt, G., Block, G., and Danielsen, B.,n Published by: McGraw-Hill, 14th edition, (2011). Note: Books are available at Alshaqree Book Store. Supplementary References 1. Fundamentals of corporate finance by Brealqy, R., Myers,s. and Marcus, A. Published by Mcgraw-Hill, 6th edition (2009). 2. www.tadawul.com.sa 3. www.cma.org.sa 4. www.bfasaudi.com Week DETAILED TEACHING AND LEARNING GUIDE Date Week starting Activities (Topic) 1 25/3/1435 Registration 26/1/2014 2 2/4/1435 2/2/2014 The Goals and Functions of Financial Management and Review of Accounting 3 9/4/1435 9/2/2014 4 16/4/1435 16/2/2014 5 23/4/1435 23/2/2014 6 1/5/1435 2/3/2014 7 8/5/1435 9/3/2014 8 15/5/1435 16/3/2014 Financial Analysis Financial Forecasting First Mid-term Exam (Chapters: 1 to 4) Operating and Financial Leverage The Time Value of Money 9 22/5/1435 23/3/2014 Spring Break 10 29/5/1435 30/3/2014 The Time Value of Money Department of Finance 4
11 6/6/1435 6/4/2014 12 13/6/1435 13/4/2014 Valuation and Rates of Return 13 20/6/1435 20/4/2014 14 27/6/1435 27/4/2014 Second Mid-term Exam (Chapters: 5,9 and 10) Cost of Capital 15 5/7/1435 4/5/2014 The Capital Budgeting Decision 16 12/7/1435 11/5/2014 17-19 19/7/-5/8/1435 18/5/-5/6/2014 Students Power-Point presentation (Group Project) Final Exam (All Chapters except Chapter 1) The Event Important Dates Spring Break 22-28/5/1435 23-29/3/2014 First Mid-Term (20%) 8/5/1435 9/3/2014 Second Mid-Term (20%) 20/6/1435 20/4/2014 Group Project and Power Point Pt. (15%) 20/7/1435 12/5/2014 Final Exam (40%) 19/7/-5/8/1435 18/5/-5/6/2014 LECTURE TOPICS: AN OVERVIEW Topics Details 1 The Goals and Functions of Financial Management (Chapter 1) 2 Review of Accounting (Chapter 2) The major thrust of this chapter is to establish the objectives of financial management and the importance of the financial manager to the organization. Some highlight will be on the importance of owner wealth maximization as a goal and briefly relate it to valuation concepts associated with risk and return. In addition, the role and functions of the financial markets in allocating capital will be emphasized as well as the pressures of institutional investors on financial managers. Discussion of social responsibility and its relationship to the financial objectives of the firm. This chapter will prove invaluable in establishing the relationship between accounting and finance. Department of Finance 5
3 Financial Analysis (Chapter 3) 4 Financial Forecasting (Chapter 4) Ratio Analysis as an instrument of financial analysis will be covered in this chapter. Though the student must be familiar with the calculation and meaning of each individual ratio, the primary emphasis of this analysis is on the inter-relationship between the ratios to make better decision. Financial forecasting is essential to the strategic growth of the firm. The three financial statements for forecasting viz. the pro forma income statement, the cash budget and the pro forma balance sheet are to be discussed. 5 Operating and Financial Leverage (Chapter5) The Chapter offers an opportunity to more fully explore the financial effects of all forms of leverage on the firm. The contrast between aggressive and conservative approaches should be emphasized particularly through the useful technique of computing degrees of leverage. This chapter also serves as a good basis for much of the later discussion in the text on the cost of capital. The student begins to appreciate the positive benefits of debt, but also realizes that unlimited use of debt increases the financial risk of the firm and perhaps the cost of various other sources of financing. The Time Value of Money (Chapter 9) Valuation and Rates of Return (Chapter 10) Cost of Capital (Chapter 11) Understand what is meant by the Time Value of Money, and the relationship between present and future value. Use interest factor table and understand how they provide a shortcut to calculating present and future values. Use interest factor tables to find an unknown interest rate or growth rate when the number of time periods and future and present values are known. This Chapter offers an opportunity to more fully explore the methods of valuing bonds, preferred stocks, and common stocks. Students should be able to calculate the rates of return of different types of long term securities Students should be able to define the overall Cost of Capital of the firm, and explain and use the alternative models to determine the cost of securities. The Capital Budgeting Decision (Chapter 12) Students Should be able to define capital budgeting and identify the steps involved in the capital budgeting process. Department of Finance 6