Unit 1139: Corporate Finance Fundamentals

1. Introduction to Corporate Finance

• Definition and scope of corporate finance
• Importance in managerial decision-making
• Roles and responsibilities of financial managers
• Primary goal: Maximizing shareholder wealth

2. Financial Statements Analysis

• Overview of key financial statements
  • Balance Sheet: Assets, liabilities, and equity
  • Income Statement: Revenues, expenses, and profit
  • Cash Flow Statement: Operating, investing, and financing activities
• Techniques for financial analysis
  • Ratio analysis: Liquidity, profitability, solvency, and efficiency ratios
  • Trend and comparative analysis
• Evaluating financial performance and health

3. Time Value of Money (TVM)

• Concept and rationale behind TVM
• Present Value (PV) and Future Value (FV) calculations
• Annuities and perpetuities
• Application of TVM in corporate finance decisions
  • Loan amortization
  • Valuation of bonds and stocks

4. Capital Budgeting

• Definition and importance of capital budgeting
• Evaluation techniques
  • Net Present Value (NPV)
  • Internal Rate of Return (IRR)
  • Payback Period
  • Profitability Index
• Project cash flow estimation
• Capital budgeting decision rules and considerations

5. Cost of Capital

• Definition and components
• Cost of debt and cost of equity
• Calculating Weighted Average Cost of Capital (WACC)
• Use of WACC in investment appraisal and capital structure decisions

6. Capital Structure

• Definition and significance
• Debt vs. equity financing
• Trade-off theory and its implications
• Impact of financial leverage on risk and return
• Optimal capital structure concepts

7. Dividend Policy

• Types of dividend policies (stable, residual, hybrid)
• Factors influencing dividend decisions
• Dividend theories (Dividend irrelevance, bird-in-hand, signaling)
• Effects of dividend policy on shareholder wealth and company valuation

8. Working Capital Management

• Definition and importance
• Components of working capital
  • Cash management
  • Inventory management
  • Accounts receivable and payable management
• Techniques for managing liquidity and operational efficiency

9. Risk Management and Derivatives

• Types of financial risks faced by corporations
• Risk identification and measurement
• Introduction to derivatives
  • Options: Calls and puts
  • Futures and forwards
• Using derivatives for hedging and risk mitigation

10. Corporate Governance and Ethics

• Definition and principles of corporate governance
• Importance of transparency and accountability
• Ethical issues in corporate finance
• Role of governance in enhancing shareholder value
• Regulatory frameworks and best practices