Module Information
Module Identifier
AC30520
Module Title
Corporate Finance and Financial Markets
Academic Year
2020/2021
Co-ordinator
Semester
Semester 2 (Taught over 2 semesters)
Pre-Requisite
Other Staff
Course Delivery
Assessment
Due to Covid-19 students should refer to the module Blackboard pages for assessment details
| Assessment Type | Assessment length / details | Proportion |
|---|---|---|
| Semester Exam | 3 Hours Unseen written examination | 80% |
| Semester Assessment | 2000 word essay | 20% |
| Supplementary Exam | 3 Hours Unseen written examination Repeat failed elements (or equivalent) | 80% |
| Supplementary Assessment | 2000 word essay Repeat failed elements (or equivalent) | 20% |
Learning Outcomes
On successful completion of this module students should be able to:
* Describe, explain and illustrate the structure, characteristics, attributes, purposes and operation of financial markets and a variety of financial market instruments.
* Explain and analyse the regulation risks faced by banks and the management of bank risks and evaluate the rationale for existence of financial institutions and the need for financial intermediation
* Describe and explain and illustrate the issues of capital structure, dividend policy, leasing versus purchase policy, working capital management, accounting-based valuation and financial distress prediction (and associated matters).
* Describe, derive, interpret and apply models which have been proposed to illuminate these issues.
* Solve related numerical problems.
* Describe, explain and illustrate the evolution of the debate upon these issues.
* Compare and contrast differing opinions and positions in these debates.
* Assess and criticize the models.
* Relate key financial issues one to another, to associated theory and to the preferences and expectations of key stakeholders.
* Select, explain and apply appropriate theory to questions and problems.
* Explain and discuss.
Aims
This module is a core module to the SMB N400 (Accounting and Finance) and N310 (Business Finance) UG degrees; core to the Accounting and Finance major and required for the Accounting and Finance minor; and core to the IMAPS degree G1N3 (Financial Mathematics).
The module covers topics in capital structure, dividend policy, leasing, working capital management, accounting- based valuation, financial distress prediction and financial markets and institutions which are essential subject matter within any high-quality undergraduate degree in accounting and/or finance; and which are expected by:
The module covers topics in capital structure, dividend policy, leasing, working capital management, accounting- based valuation, financial distress prediction and financial markets and institutions which are essential subject matter within any high-quality undergraduate degree in accounting and/or finance; and which are expected by:
- Honours Degree Subject Benchmark Statement: Accounting (2007), Quality Assurance Agency for Higher Education
- Honours Degree Subject Benchmark Statement: Finance (2007), Quality Assurance Agency for Higher Education
- Institute of Chartered Accountants in England and Wales
- Association of Chartered Certified Accountants
- Chartered Institute of Management Accountants
- Institute of Chartered Accountants of Scotland
Brief description
This module aims to provide students with a thorough treatment of financial markets and institutions; and the key financial issues faced by the directors and managers of firms, which include: capital structure; dividend policy; leasing (versus borrow and purchase) policy; and working capital management.
This will be approached by consideration of context in which decisions upon these issues are made; presentation and analysis of the debates which have surrounded (and continue to surround) them; recourse to the associated theoretic and empirical academic literature; and destruction of the idea of a set of discrete, simple solutions.
This will be approached by consideration of context in which decisions upon these issues are made; presentation and analysis of the debates which have surrounded (and continue to surround) them; recourse to the associated theoretic and empirical academic literature; and destruction of the idea of a set of discrete, simple solutions.
Content
The following topics are covered:
1. INTRODUCTION TO CORPORATE FINANCE/FINANCIAL MARKETS
(a) Firm structure and their objectives
(b) Sources of Finance
(c) Debt versus equity Financing
(d) Signaling and agency theory
(e) The Efficient Market Hypothesis
(f) Introduction to the different types of markets i.e. continuous/call/money/capital
(g) current issues within the global financial markets
2. FINANCIAL MARKETS
(a) Financial instruments and innovation
(b) Market microstructure
(c) Principles of banking
(d) Financial Intermediation
(e) Risk and Regulation in Banking
3. TAXATION
(a) Classification of tax systems
(b) Basis of assessment and advance corporation tax (and its abolition)
(c) Basis of deduction
(d) Revenue and Capital Expenditure
(e) Relief for Capital Expenditure: Capital Allowances
(f) Trading Losses
(g) Transfer pricing
3. COST OF CAPITAL AND CAPITAL STRUCTURE
(a) Cost of Capital (Ordinary shares, retained earnings, preference shares, debt, Weighted Average Cost of Capital)
(b) Gearing and Debt/equity ratio
(c) Theories of Capital Structure: Traditional and Modernist views
(d) Modigliani and Miller derivations and arbitrage examples
(e) Market imperfections
(i) Corporate and Personal Taxes
(ii) Risky debt
(iii) Bankruptcy Costs
(f) Signaling and Agency theories
(g) empirical evidence
(h) Investment appraisal- Adjusted Present Value (APV)
4. EQUITY FINANCE AND DIVIDEND POLICY
(a)Methods of issuing equity
(b) Factors affecting dividend policy, which include signaling theory, agency theory and clientele theory
(c)Dividend relevance versus irrelevance
(d) Empirical evidence
(e) Dividend policies and alternative distribution channels.
5. LEASING
(a)Finance Lease/ Operating Lease
(b) Financial accounting and tax accounting treatment
(c) Reasons for Leasing
(d) Lease Evaluation
6. WORKING CAPITAL MANAGEMENT
(a) Reasons for investing in WCM
(b) Objectives of WCM and policies
(c) Cash conversion cycle and WCM requirement
(d) Stock management, cash management, debtor management, creditor management
(e) overtrading and the economic order quantity model
7. ACCOUNTING BASED VALUATION AND FINANCIAL DISTRESS PREDICTION
(a) accounting-based valuation models
(b) financial distress prediction models,
1. INTRODUCTION TO CORPORATE FINANCE/FINANCIAL MARKETS
(a) Firm structure and their objectives
(b) Sources of Finance
(c) Debt versus equity Financing
(d) Signaling and agency theory
(e) The Efficient Market Hypothesis
(f) Introduction to the different types of markets i.e. continuous/call/money/capital
(g) current issues within the global financial markets
2. FINANCIAL MARKETS
(a) Financial instruments and innovation
(b) Market microstructure
(c) Principles of banking
(d) Financial Intermediation
(e) Risk and Regulation in Banking
3. TAXATION
(a) Classification of tax systems
(b) Basis of assessment and advance corporation tax (and its abolition)
(c) Basis of deduction
(d) Revenue and Capital Expenditure
(e) Relief for Capital Expenditure: Capital Allowances
(f) Trading Losses
(g) Transfer pricing
3. COST OF CAPITAL AND CAPITAL STRUCTURE
(a) Cost of Capital (Ordinary shares, retained earnings, preference shares, debt, Weighted Average Cost of Capital)
(b) Gearing and Debt/equity ratio
(c) Theories of Capital Structure: Traditional and Modernist views
(d) Modigliani and Miller derivations and arbitrage examples
(e) Market imperfections
(i) Corporate and Personal Taxes
(ii) Risky debt
(iii) Bankruptcy Costs
(f) Signaling and Agency theories
(g) empirical evidence
(h) Investment appraisal- Adjusted Present Value (APV)
4. EQUITY FINANCE AND DIVIDEND POLICY
(a)Methods of issuing equity
(b) Factors affecting dividend policy, which include signaling theory, agency theory and clientele theory
(c)Dividend relevance versus irrelevance
(d) Empirical evidence
(e) Dividend policies and alternative distribution channels.
5. LEASING
(a)Finance Lease/ Operating Lease
(b) Financial accounting and tax accounting treatment
(c) Reasons for Leasing
(d) Lease Evaluation
6. WORKING CAPITAL MANAGEMENT
(a) Reasons for investing in WCM
(b) Objectives of WCM and policies
(c) Cash conversion cycle and WCM requirement
(d) Stock management, cash management, debtor management, creditor management
(e) overtrading and the economic order quantity model
7. ACCOUNTING BASED VALUATION AND FINANCIAL DISTRESS PREDICTION
(a) accounting-based valuation models
(b) financial distress prediction models,
Module Skills
| Skills Type | Skills details |
|---|---|
| Application of Number | * Develop an easy familiarity with numerical data sources and numerical data * Apply numerical data to problem solving with care and accuracy * Assess the reasonableness of and interpret numerical solutions * Support assertions/arguments with appropriately developed and presented numerical data * Apply/ Derive complex mathematical formulae |
| Communication | * Develop confidence in and clarity of oral communication via example class/tutorial participation * Develop clarity and focus of written communication via development of answers to self study questions/ assignment production * Develop and use appropriate subject-specific vocabulary in oral and written communication |
| Improving own Learning and Performance | * Identify and distil the key issues covered by lectures, tutorials and self study * Identify and use a range of learning resources * Investigate benefits of small group working on self study * Structure study to accommodate intensive learning |
| Information Technology | * Use a variety of electronic web- and library-based resources to review available information and retrieve pertinent information * Use of word-processing skills in assignment |
| Personal Development and Career planning | * Preparation for seminar tasks will encourage initiative, independence and self-awareness * Identify a variety of potential career opportunities within the financial and professional services sector. |
| Problem solving | * Identify the precise problem to be solved * Assess which data are pertinent to the problem * Recognize that alternative solution methods might be available * Select and apply appropriate methods for solving the problem * Assess the reasonableness of problem solutions and interpret those solutions |
| Research skills | * Identify which information sources are available to: facilitate module study (understanding, wider reading) provide data which allow application of module learning in a real world context * Properly reference/attribute information sources |
| Subject Specific Skills | * Develop competence in understanding and appropriately applying Corporate Finance models/ theory to practice. * Develop competence in understanding the key financial decisions which are faced by the directors and managers of firms. * Develop competence in understanding and analyzing financial market transformations and market efficiency. |
| Team work | * Develop experience of team work and develop team working skills via small group working on self study * Group work during seminars |
Notes
This module is at CQFW Level 6