THE COPPERBELT UNIVERSITY

SCHOOL OF BUSINESS

BS/BF 224: Managerial/Corporate Finance

Background and Rationale

The objective of the course is to provide the student with an understanding of the
nature and role of financial management and to provide an understanding of the
theoretical and analytical techniques used in financing and investment decisions.

Learning outcomes
At the end of the course students will be expected to:
(a) Know sources of finance available to a firm and the factors to consider when
choosing a source of funds.
(b) Know how to appraise investment projects and the factors to consider in working
capital management.
(c) Understand the factors involved in dividend decisions

Course content

1.0 Introduction
.The finance function
. Financial decisions
. Maximizing shareholder wealth versus other goals
. Agency problem
. The role and functions of a finance manager

2.0 Basic concepts in finance

. Time value of money (compounding and discounting)
. Present/future value of uneven cash flows and annuities
. Annual payments for accumulation of a future sum
. Valuation of direct claim securities
. Valuation of bonds, current yield, yield to maturity and yield to call
. Valuation of preferred stock
. Valuation of common equity
 . Quantifying risk and return, portfolio risk and return, CAPM and the SML

3.0 Working capital management

. Sources and forms of short-term credit
. Factor influencing choice of source of short-term credit
. The management of cash and the optimal cash balance
. Management of marketable securities
. Management of accounts receivable and credit policy
. Management of inventory and the economic order of quantity
. Nature and importance of working capital management
. Profitability versus liquidity
. The operating cycle and the cash cycle
. Overtrading

4.0 Long-term finance

. Sources of long-term funds:
Venture capital
Term loans
Bond financing
Preferred stock financing
Common stock financing
Retained earnings
. Introduction to derivative securities

5.0 Capital structure and the cost of capital

. Financial structure versus capital structure
. Importance of managing the capital structure
. Benefits of financial leverage
. Operating, financial and total leverage
. The cost of debt, cost of preferred stock and cost of common equity
. The weighted average cost of capital
. The optimal capital structure.

6.0 Capital Budgeting Techniques

. The capital budgeting process and significance of capital budgeting
. Capital budgeting techniques:
Payback period
Discounted payback period
Net present value
Internal rate of return
Accounting rate of return and profitability index
. Evaluation and comparison of these techniques
. Capital rationing
. Introduction to capital budgeting under uncertainty
 7.0 Dividend policy
. The dividend decision
. Dividends, retained earnings and capital gains
. The company’s dividend policy
. The payout ratio
. Impact on growth and share price
. Dividend payout procedure
. Influences on dividend payment and policy

8.0 Financial Analysis

. Purpose of financial analysis
. Techniques of financial analysis: common size analysis and ratio analysis
. Interpretation of result
. Financial forecasting and techniques of financial planning and control

Assessment
• Continuous Assessment 40%
• Final Exams 60%

Prescribed Textbook

Recommended Textbooks
• J. Weston & E. Brigham. Essentials of Managerial Finance. Dryden Press
• James C. Van Horne. Fundamentals of Financial Management. Prentice Hall.
• Ross. Corporate Finance Fundamentals. McGraw-Hill.