Duration
30h Th
Number of credits
Lecturer
Language(s) of instruction
English language
Organisation and examination
Teaching in the second semester
Schedule
Units courses prerequisite and corequisite
Prerequisite or corequisite units are presented within each program
Learning unit contents
The course of "Corporate Finance" lays the theoretical and practical foundations for valuing firms and corporate investment projects as well as for dealing with short-term and long-term financing decisions.
The course starts with a general introduction about Corporate Finance. With the objective of maximizing firm value, the course will address the following key questions:
- In what long-lived assets should the firm invest? Capital budgeting/Investing decisions
- How can the firm raise cash for its required capital expenditures? Financing decisions and capital structure
- How should short-term operating cash flows be managed? Timing of cash flows and short-term financing decisions
Block 1: Introduction to Corporate Finance (Fundamentals)
Basics of discounting and valuation (time value of money, effective/nominal/proportional interest rates)
Block 2: Financial analysis
- Financial statement analysis
- Financial statements and applicable adjustments
- Horizontal/vertical common-size statements
- Financial ratios (liquidity, solvability, profitability, efficiency)
Cash flows available for both providers of capital
Block 4: Cost of capital
- Review of financial market theory: CAPM, Yield curve, business vs. financial risk
- Cost of equity, cost of debt
- Capital structure
- Debt tax shield
Block 5: Discounted Cash flow
Income approach: Finite and infinite life
Block 6: Firm valuation
DCF : Infinite life analysis
- Effect of leverage and capital structure
- Weighted average cost of capital
- Determination of the Free Cash Flows to the Firm and forecasts
Market approach
- Introduction to multiple analysis (relative valuation)
- Finite and infinite life analysis
- Net Present Value (NPV)
- Determination of the Free Cash Flows to the Firm and forecasts
- Weighted average cost of capital
- Effect of leverage and capital structure
Alternative investment rules: the Internal Rate of Return (IRR), Payback, Accounting Rate of Return, Profitability ratio
Block 9: Corporate finance at work in a company
Block 9 shows examples of how corporate finance is at work in a company.
Learning outcomes of the learning unit
Consistently with the Key Learning Outcomes (KLO), students will develop the following individual capacities:
(1) Students will be able to execute the financial management of a company.
(1.1) They will acquire the fundamental knowledge and understanding in financial management to perform a rigorous analysis of a management problem such as an investment project, a firm valuation or (short-term, long-term) financing decisions.
(1.2) Especially, they will (i) compute and forecast cash flows used for project or firm valuation, (ii) estimate the prevalent cost of capital to be used to discount cash flows, (iii) compute the Present Value of an investment project or a firm, (iv) value business acquisition opportunities and, (v) make a deep analysis of the working capital needs of a firm.
(2) They will learn how to establish a strategy to answer concrete complex and transversal financial management problems by applying modelization tools and by making use of market data.
(3) They will strengthen their communication skills in business related problems and in English and develop a transversal view of a financial management problem to adapt their management practices in the specific context of a firm or project valuation and financing.
Prerequisite knowledge and skills
The course will extend students' knowledge acquired during an initial bachelor's degree in management. The course therefore requires basic knowledge in financial mathematics, financial analysis and reporting (see infra) and financial markets. As a prerequisite, students are invited to read Chapters 2,3,4,5 and 23 of Hillier, Grinblatt and Titman, Financial Markets and Corporate Strategy (second European edition).
Review of the prerequisites in financial market theory and financial analysis will be covered during the introductory lecture, Block 1 on fundamentals, Block 2 on financial analysis and Block 4 on the WACC.
Planned learning activities and teaching methods
The course is structured into nine blocks composed of theoretical lectures including exercises, practical seminars (case studies) and remediation sessions.
The detailed planning can be found on lol@ in the introduction slides.
Lectures
Lectures will transfer to students the theoretical knowledge and the practical tools for solving complex investment and firm valuation problems. Students are expected to participate to class and to read the related chapters in the textbook. Exercises sessions will be organized on each module and will be integrated to the lectures.
Remediation
Remedial sessions will be organized to support students in their learning process. Besides, one course organized at the end of the series of lectures will wrap up the competencies acquired during the lectures, exercises sessions and case studies in order to prepare students for the exam.
Students are encouraged to post their questions, grouped by chapters, on a specific forum on lol@. Student hours will be announced to allow students to ask their questions or review some of the questions from the forum (Friday morning).
Seminars
The seminars include practical case studies to be performed autonomously by groups of two through distance learning. Q&A sessions will be organized to answer questions. This will enable students to test their capacity to research autonomously and methodically the information needed to solve a transversal management problem and to test their capacity to use modelization tools to propose rigorous solutions to complex financial management problems.
Mode of delivery (face to face, distance learning, hybrid learning)
Blended learning
Further information:
The course is composed of on site lectures and exercise sessions, tutorials as well as virtual Q&A and case studies. For security reasons, access links are available in the class schedule.
All practical information will be provided during the first course (textbooks, schedule, course outile, lectures and seminars' objectives, exam).
Remediation/question-answer sessions will be organized: Dates and timing are announced on lol@.
Self-assessment quizzes are available on the course platform in order to train for the exam (Multiple choice questions)
Students are invited to ask questions exclusively on the forum from the course platform. Students will receive answers to their questions at the latest on Thursday of week Y for questions asked before Friday of week Y-1. Students are asked to make use of the forum to ask questions regarding the course rather than emails. They will be automatically redirected to the forum.
Course materials and recommended or required readings
Mandatory readings
- Hillier, Grinblatt and Titman, Financial Markets and Corporate Strategy, McGraw-Hill, Second European Edition
- Equity Valuation, CFA Institute
For the prerequisites, please see supra. Chapters covered in class will be announced in class.
These readings will enable students to deepen their understanding of the key concepts seen throughout the course. Students' understanding will be tested at the written exam.
Recommended readings
Financial Statement Analysis: An introduction by Elaine Henry, CFA, and Thomas R. Robinson, CFA
Financial Reporting Mechanics - International Financial Statement Analysis, by Thomas Robinson, CFA, Jan Hendrik van Greuning, CFA, Elaine Henry, CFA and Michael A. Broihahn, CFA
Financial Reporting Standards by Elaine Henry, CFA , Jan Hendrik van Greuning, CFA, and Thomas R. Robinson, CFA
Understanding Income Statements by Elaine Henry, CFA and Thomas R. Robinson, CFA
Understanding Balance Sheets by Elaine Henry, CFA, and Thomas Robinson, CFA
Understanding Cash Flow Statements by Elaine Henry, CFA and Michael A. Broihahn, CFA
Financial Analysis Techniques by Elaine Henry, CFA, and Thomas R. Robinson, and Jan Hendrik van Greuning, CFA
Inventories by Michael Broihahn, CFA
Long-lived Assets by Elaine Henry, CFA and Elizabeth A. Gordon
These readings will enable students to deepen their understanding of the prerequisites for the course: Financial Reporting and Analysis.
Course material
The course material (slides, case studies and exercises) will be available on the course web page on lol@: http://lola.hec.ulg.ac.be
Exam(s) in session
Any session
- In-person
written exam
Written work / report
Continuous assessment
Further information:
A multiple choice exam will assess students' understanding of concepts linked to investment's project and firm valuation as well as students' capacity to solve problems. It counts for 75% of the grade.
The continuous assessment will evaluate student's diligence in doing the end of block quizzes and preparation of the case studies. To be accounted for the continuous evaluation, the block quizzes need to be done (i) individually, (ii) seriously (no random selection of answers, quiz to be completed in one « go » and not split over multiple days and completed in a reasonable time) and (iii) meeting the deadlines announced in class. Besides, Groups of 2 students will work on the case studies as part of the evaluation. It counts for 25% of the grade.
Students who fail the first attempt exam or do not present themselves at the exam will have to retake the exam in the second session organized in August/September. There is no intermediary session. The written exam will count for 100% of the grade in the second attempts.
Exam visit
Students have the right to review their exam copy after the publication of the results. The student has to contact the professor within max. the two weeks following the announcement of the results. The meeting with the student should be organized within the month of the release of the result.
Work placement(s)
None
Organisational remarks and main changes to the course
Students have the opportunity to ask questions on the material during the class (please use the interactive tool!). Outside the course hours, students should post their questions on the forum on lol@, except for personal matters which have to be sent to alexandre.scivoletto@uliege.be.
Students are invited to check the lol@ platform on a regular basis for any practical information regarding the course or any schedule change.
Contacts
Professor
Marie Lambert - Professor at HEC - marie.lambert@uliege.be
Teaching assistant:
Alexandre Svivoletto - alexandre.scivoletto@uliege.be