FINC 350 DEE Business Finance

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Columbia College Online Campus P a g e | 1

FINC 350 DEE

Business Finance

March 2015 Session (14-54)

Monday, March 23, 2015 - Saturday, May 16, 2015

Course Description

A study of the finance function in corporate decision-making. Topics include financial statement analysis, risk and return, valuation, cost of capital, working capital management, time value of money, and capital budgeting.

Prerequisite: ACCT 281, MATH 150 or MATH 170 Proctored Exams: None

Textbooks

Stanley B. Block, Geoffrey A. Hirt and Bartley R. Danielson (2014), Foundations of Financial Management With Time Value of Money, McGraw-Hill Irwin, 15th edition.

ISBN: 978-1259194078

Benjamin Graham and Spencer Meredith. (1998). Interpretation of Financial Statements, Harper Business.

ISBN: 978-0-88730-913-7

Textbooks for the course may be ordered from MBS Direct. You can order

 online at http://direct.mbsbooks.com/columbia.htm (be sure to select Online Education rather than your home campus before selecting your class)

 by phone at 800-325-3252

For additional information about the bookstore, visit http://www.mbsbooks.com.

Course Overview

Welcome to FINC 350 Business Finance, online! Upon completion of this course you should have and be able to demonstrate a working knowledge of theories, methods and procedures used in analyzing the financial management of a firm. In addition, when we are finished you should be cognizant of new developments and trends within the field of finance.

Each week we will focus on a different area of our subject. Using online conferencing discussions we will delve into the intricacies of our subject and expand upon and reinforce particularly relevant issues with readings from our text, Foundations of Financial Management,and other sources.

Technology Requirements

Participation in this course will require the basic technology for all online classes at Columbia College:

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Columbia College Online Campus P a g e | 2  A computer with reliable Internet access,

 a web browser,  Acrobat Reader,

 Microsoft Office or another word processor such as Open Office.

You can find more details about standard technical requirements for our courses on our site.

Course Objectives

 To demonstrate a working knowledge of theories, methods and procedures used in analyzing the financial management of a firm.

Measurable Learning Outcomes

 Develop the analytical skills necessary of financial decision-making based on an

understanding of the factors that impact financial decision-making, implementation and evaluation.

 Analyze financial statements and interpret financial ratios to assess company performance.  Explain how a firm’s operating, financing, and investment decisions are reflected in their

financial reports.

 Describe the importance of effective working capital management.

 Explain the term structure of interest rates and the relationship between risk and return.  Apply the principles of the time value of money to single and multiple cash flows and value

corporate securities.

 Integrate expected rates of return and the firm’s capital structure to calculate and evaluate the firm’s cost of capital.

 Describe and explain the way in which investment projects are analyzed including the impact of risk, taxes, and inflation and apply techniques of capital budgeting.

Grading

Grading Scale

GRADE POINTS PERCENT A 900-1000 90-100

B 800-899 80-89

C 700-799 70-79

D 600-699 60-69

F 0-599 0-59

Grade Weights

ASSIGNMENT POINTS PERCENT

Discussions 80 8%

Homework Problems 120 12%

Quizzes 600 60%

Project 200 20%

TOTAL 1000 100%

Schedule of Due Dates

WEEK ASSIGNMENT POINTS DUE DAY

1 Discussion (Introductions) None Tuesday

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Columbia College Online Campus P a g e | 3 Responses Friday

Homework Problems 15 Saturday

Project – Financial Statements 25 Friday/Sunday*

2

Discussion #2 10 Wednesday/Friday

Week Two Quiz 150 Sunday

3

Project – History & Background 25 Friday/Sunday*

4

Week Four Quiz 150 Sunday

5

Project – Financial Analysis 50 Friday/Sunday*

6

Week Six Quiz 150 Sunday

7

Project – Summary & Recommendations 100 Friday/Sunday*

8

Week Eight Quiz 150 Saturday

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*

Project submissions have two due dates, based on how quickly you wish to receive feedback. Any project assignments submitted by 11:59 pm on Friday nights will be graded and feedback posted by the following Monday (within 72 hours). However, if you wish to have the weekend to work on the paper you can submit it by 11:59 pm on Sunday nights for full credit but you will not receive a grade and feedback until the next weekend.

Assignment Overview

Each student is responsible for:

 Regular contact with the instructor and other students.  Weekly reading assignments.

 Weekly Discussion.

 Weekly Homework Problems.  Four Quizzes.

 One Project (four pieces).

Discussion: For each topic, I expect at least three substantive postings that have the effect of moving the discussion forward. The postings should consist of a Main Posting and at least two postings that respond to other students, and they should occur on at least three separate days. Your initial post and responses to your classmates are due by the days indicated in the assignment schedule. Grades will be based on the punctuality and the quality of your responses. At a minimum, you must have postings on three separate days during each of the discussion periods. Discussion postings should be submitted to the appropriate topic in the Discussions area of the course.

Homework Problems: Each week you will work a number of problems from the text. The problem assignments can be found in the Content area of the course. You will submit your answers through the Quizzes area of the course (although there is no time limit set) so that you can see the answers and get feedback immediately on your responses. Homework problems must be submitted by midnight of the day indicated in the assignment schedule.

Quizzes: There will be four quizzes in this course composed of 40 multiple-choice and short answer items that test your knowledge of the material covered in the course. They are available in the Quizzes area of the course.

Project: You will receive feedback on the components of the project as they are submitted and can use this feedback to revise your submission (with the exception of the Week Seven submission). Resubmissions of any course project piece are due on the deadline for the next project piece. As an example, any resubmission of the Week One project piece would have the same due date/time as the Week Three project piece. Each piece of the course project can only be resubmitted once and

resubmissions are not allowed on the Week Seven piece. A full explanation of expected requirements for the final project submission is available in the Content area of the course. Remember that the final submission must encompass all of what you regard as information relevant to your recommendation as to which company should be the investment target. Project assignments should be submitted to the appropriate folder in the Dropbox area of the course.

Course Schedule

Week 1 – Getting Acquainted, Getting Started

 Readings:

Read Chapters 1, 2, and 14 of the textbook and the material in the Content area of the course for Week 1, particularly the web sites and other multimedia resources in the class.

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Columbia College Online Campus P a g e | 5  Class Activities:

Visit the course Syllabus and get comfortable with what is expected of you. To begin let’s introduce ourselves and become acquainted with our web based course. Tour the college’s Web site at http://www.ccis.edu. Sign into, and browse the Columbia College site as a student and get familiar with the layout of the course. Make sure you visit the Columbia College Library online and check out financial research resources available from Standard & Poor’s and the Value Line Investment Service (these are available through the Columbia College online library, accessible through your CougarTrack account). Become comfortable with the techniques of posting to the discussion and the dropbox, with email management (using your browser's email capability), and the available diagnostic tools. Finally, begin to build a "portfolio" of resources of your own, including your bookmarks, newsgroups, proprietary and open access databases. This portfolio will come in handy for future web-based business courses.

 Discussion:

Introductions: This first week I want you to take the time to introduce yourself to the class in the Discussion area of our "virtual classroom." Please give us more than your name. Include your occupation, hobbies, interests, and career objectives. There is no credit for this but it is an expectation.

Topic: What exactly does it mean to say that the goal is to maximize shareholder wealth? Obviously, we mean maximize shareholder wealth in a manner consistent with the law, but does a corporation have other stakeholders besides its shareholders? Who comes first? What does the law require?

 Homework Problems:

Problems 2-1, 2-2, 2-22, and 2-24. Submit your solutions through the Quizzes tool.  Project:

Decide which pair of companies you will be analyzing for your final project. You must pick a pair of companies from the four pairs of companies listed in the Course Project description in the Content area of the course. Do some research on the two companies. In particular, look for their most recent financial statements. Next week we get into financial statement analysis in a much deeper way, but for now calculate a few simple ratios, like the book value per share, current ratio, and profit margin. Write a brief description of your findings, including an introduction to both companies, and post it to the appropriate Dropbox. Your paper should be 3-4 pages (double spaced) of your own written material. A cover page and reference page per APA is required but not part of the page count. See the Course Project documentation in the Content area of the course for more information on what is expected.

Week 2 – Financial Statement Analysis & Working Capital Management

 Readings:

Chapters 3 through 6 in the text and the material in the Content area of the course for Week 2, particularly the web sites and other multimedia resources in the class.

 Discussion:

Financial analysis (called security analysis on Wall Street) can be less than totally objective. How big a problem do you think this is? What can be done to manage potential conflicts of interest? Maybe we just have to live with it and search out the hidden agendas. What do you think? How do you react to Sarbanes Oxley? Doesregulation work? If you think it does, how did Madoff happen, or ENRON?Before you post you might want to re-read the “Finance in Action” item on page 68.

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Columbia College Online Campus P a g e | 6 Problems 3-1, 4-6, 5-1, 5-2, and 6-7. Submit your solutions through the Quizzes tool.

 Week Two Quiz:

Take the Week Two Quiz to be found in the Quizzes area of the course.  Project:

Continue to work on the Project.

Week 3 – The Time Value of Money

 Readings:

Read Chapters 9 and 10 in the text and the material in the course content for Week 3, particularly the web sites and other multimedia resources in the class.

 Discussion:

In 1965, Warren Buffett acquired control of a New England textile business called Berkshire Hathaway for about $10 a share. Today the stock sells for around $120,000 a share and Mr. Buffett is the wealthiest person in the United States. The stock has never paid a dividend. How does this amazing success fit the theory that the value of a stock is based on the present value of the expected future stream of dividends? Visit www.berkshirehathaway.com and get familiar with the company. Tell me what you think the future holds for the company. Read his letters to his shareholders (they are in the Content Area) and what he calls the Berkshire Hathaway “owner’s manual” (also in the Content Area). In an age of hi-tech why did he recently buy the Burlington Northern Railroad for $44 billion? How will the company fare after his inevitable departure?

Problems 9-1, 9-10, 9-18, 10-1, and 10-15. Submit your solutions through the Quizzes tool.  Project:

Continue to work on the Project: This week I want you to do some research on the history of the two companies and then write a paper that tells me what you have learned. What do they have in common? How are the businesses different? This will take some deep digging. A little “ancient history” is all right but concentrate on the last ten years. Post your paper to the appropriate dropbox. Your paper should be 4-5 pages of your own written material. A title page and reference page should be included but not as part of the page count. Follow APA format. See the Course Project documentation in the Content area of the course for more information on what is expected.

Week 4 – Bond & Stock Valuation

 Readings:

Review Chapter 10 and preview Chapters 16 and 17 in the text and the material in the course content for Week 4, particularly the web sites and other multimedia resources in the class.

 Discussion:

What is the right price for a stock? Is it book value, liquidation value or simply its market price at a given moment in time? Would you value a privately-owned company where there is no market value differently than a publicly owned company where there is a market price every day? Is there a difference between “price” and “value”? This is a deeper question than you think, so think deep. It will get even deeper in Week Eight if you are really curious.  Homework Problems:

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Columbia College Online Campus P a g e | 7 Problems 10-18, 10-22, 10-27, 10-29, and 10-32. Submit your solutions through the Quizzes tool.

 Week Four Quiz:

Take the Week Four Quiz to be found in the Quizzes area of the course.  Project:

Week 5 – Capital Budgeting

 Readings:

Chapters 11, 12, and 13 and the material in the course content for Week 5, particularly the web sites and other multimedia resources in the class.

 Discussion:

A frequent criticism of the management of publicly-owned American companies is that they are too short-term oriented, too focused on fast returns, and that this negatively impacts their long term capital budgeting. Can you suggest a company, or industry, where this appears to be true. Why? How? Do the recent problems at Toyota suggest that the problem is spreading to other countries? How do we keep an emphasis on the “long-term” from

becoming an excuse for continued poor results is the “short-term.”  Homework Problems:

Problems 11-2, 11-12, 12-9, 12-13, and 13-16. Submit your solutions through the Quizzes tool.

 Project:

Now is the time to really put our formulas to work. Prepare a document showing each of the ratios from Chapter 3 along with the book value per share and DuPont analysis for both companies for each of the last five fiscal years; use the Financial Statements filed with the SEC. This submission can be an Excel spreadsheet containing the values. See the Course Project documentation in the Content area of the course for more information on what is expected.

Week 6 – Risk, Return, and the Cost of Capital

 Readings:

Read Appendix 11A in Chapter 11 and review Chapter 13 and the material in the course content for Week 6, particularly the web sites and other multimedia resources in the class.  Discussion:

This will be a real challenge, but it should be an interesting challenge. Much of the way we measure risk relies on probability distribution (the Bell Curve as shown on page 425). For many things in life, and business, this is perfectly valid, but for others it is not. Can you come up with some illustrations of business risk measurement where the bell curve type analysis is inappropriate? This will take a little research on the internet. Why may the Bell Curve be an inappropriate tool for looking at market risk? Find out what Mandelbrot (The Mis Behavior of Markets) and Taleb (The Black Swan) have to say.

Problems 13-22, 13-23, and 11A-1. Submit your solutions through the Quizzes tool.  Week Six Quiz

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Columbia College Online Campus P a g e | 8  Project

Week 7 – Cost of Capital and Common Stock

 Readings:

Chapters 11, 13 (again, but this time we go deeper), and 17.  Discussion:

In this week’s discussion we will touch lightly on EVA. Some major companies live and die by EVA. For example, at General Electric, more capital is allotted only to divisions that pass the EVA threshold, and divisions that regularly flunk are sold off. It’s a simple, but powerful, approach that looks at a company’s numbers from an economist’s point of view and factors in not just explicit costs but also implicit costs in measuring a firm’s profitability. Take a look at http://www.sternstewart.com/?content=proprietary&p=eva and

http://www.investopedia.com/articles/fundamental/03/031203.asp and tell us what you think.

Problems 17-10, 17-18, 17-21, and 17-22. Submit your solutions through the Quizzes tool.  Project:

You have finished the project and now it is time to bring it all together. I expect one final long paper containing your recommendations, concerns, thoughts, and conclusions and the evidence to support those conclusions. This piece of the course project will have two main components: a detailed analysis of the data from the Week Five submission and your final recommendations. Starting with the Week Five data, tell me what they mean to you. If you just provide a cut and paste of financials as your answer, it will receive a failing grade. You will need to show that you truly understand the various ratios and financials by examining and detailing and contrasting the information. The report should begin with an Executive Summary explicitly making a recommendation and enumerating your reasons. Which is the more promising business? Which is the better buy? The best company is not always the best value. Post your project to the appropriate Dropbox. Your paper should combine all of the previous material you deem relevant and address the issues mentioned above. Submit one final paper which should be 10-12 pages in length including a one to two page Executive Summary. If you have sets of financial statements you want to include, they should appear as an appendix to the paper. See the Course Project documentation in the Content area of the course for more information on what is expected.

Week 8 – Why do Good CFOs Make So Much Money?

 Readings:

Chapters 14 through 18 and the Berkshire Hathaway Owners’ Manual (www.berkshirehathaway.com).

 Discussion:

Should we care about Executive Compensation or how much hedge fund managers earn? How should incentive compensation be changed? Should it be changed? Who can change it? Southwest Airline’s CFO hedged fuel prices and saved the company hundreds of millions of dollars. Why was he alone in the industry in doing so? John Paulsen (admittedly

controversial) made his partners $20 billion dollars over the past few years mostly by correctly forecasting the housing market and the problems in the banking industry. They paid him over $4 billion for his work.

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Columbia College Online Campus P a g e | 9 Problems 15-1, 15-5, 16-4, 16-11, and 18-4. Submit your solutions through the Quizzes tool.  Week Eight Quiz

Take the Week Eight Quiz to be found in the Quizzes area of the course.

Course Policies

Student Conduct

All Columbia College students, whether enrolled in a land-based or online course, are responsible for behaving in a manner consistent with Columbia College's Student Conduct Code and Acceptable Use Policy. Students violating these policies will be referred to the office of Student Affairs and/or the office of Academic Affairs for possible disciplinary action. The Student Code of Conduct and the Computer Use Policy for students can be found in the Columbia College Student Handbook. The

Handbook is available online; you can also obtain a copy by calling the Student Affairs office (Campus

Life) at 573-875-7400. The teacher maintains the right to manage a positive learning environment, and all students must adhere to the conventions of online etiquette.

Plagiarism

Your grade will be based in large part on the originality of your ideas and your written presentation of these ideas. Presenting the words, ideas, or expression of another in any form as your own is plagiarism. Students who fail to properly give credit for information contained in their written work (papers, journals, exams, etc.) are violating the intellectual property rights of the original author. For proper citation of the original authors, you should reference the appropriate publication manual for your degree program or course (APA, MLA, etc.). Violations are taken seriously in higher education and may result in a failing grade on the assignment, a grade of "F" for the course, or dismissal from the College.

Information on plagiarism, including a tutorial, is available in the Content area of the course. Collaboration conducted between students without prior permission from the instructor is

considered plagiarism and will be treated as such. Spouses and roommates taking the same course should be particularly careful.

All required papers may be submitted for textual similarity review to Turnitin.com for the detection of plagiarism. All submitted papers may be included in the Turnitin.com reference database for the purpose of detecting plagiarism. This service is subject to the Terms and Conditions of Use posted on the Turnitin.com site.

Non-Discrimination

There will be no discrimination on the basis of sex, race, color, national origin, sexual orientation, religion, ideology, political affiliation, veteran status, age, physical handicap, or marital status.

Disability Services

Students with documented disabilities who may need academic services for this course are required to register with the Coordinator for Disability Services at (573) 875-7626. Until the student has been cleared through the disability services office, accommodations do not have to be granted. If you are a student who has a documented disability, it is important for you to read the entire syllabus before enrolling in the course. The structure or the content of the course may make an accommodation not feasible.

Online Participation

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Columbia College Online Campus P a g e | 10 activities each week. Assignments should be posted by the due dates stated on the grading schedule in your syllabus. If an emergency arises that prevents you from participating in class, please let your instructor know as soon as possible.

Attendance Policy

Attendance for a week will be counted as having submitted a course assignment for which points have been earned during that week of the session or if the proctoring information has been

submitted or the plagiarism quiz taken if there is no other assignment due that week. A class week is defined as the period of time between Monday and Sunday (except for Week 8, when the week and the course will end on Saturday at midnight). The course and system deadlines are all based on the Central Time Zone.

Cougar E-mail

All students are provided a CougarMail account when they enroll in classes at Columbia College. You are responsible for monitoring e-mail from that account for important messages from the College and from your instructor. You may forward your Cougar e-mail account to another account; however, the College cannot be held responsible for breaches in security or service interruptions with other e-mail providers.

Students should use e-mail for private messages to the instructor and other students. The class discussions are for public messages so the class members can each see what others have to say about any given topic and respond.

Late Assignment Policy

An online class requires regular participation and a commitment to your instructor and your

classmates to regularly engage in the reading, discussion and writing assignments. Although most of the online communication for this course is asynchronous, you must be able to commit to the schedule of work for the class for the next eight weeks. You must keep up with the schedule of reading and writing to successfully complete the class.

Homework Problems will not be accepted for late credit. Solutions are released early the morning after the problems are due so no late credit can be awarded for any reason.

Quizzes will not be accepted if submitted late unless prior arrangements have been made. In the case of late quizzes, 10% of the total point amount will be deducted. On the Monday after the quiz is due you will be able to go back into your quiz and see the questions you missed along with the full correct answer/solution.

Discussion assignments may not be made up. The only way to conduct a productive discussion online is to post and reply promptly. If you miss the opportunity to post your initial posting or response by the deadlines you will receive a ‘zero’ for that discussion topic.

Project assignments submitted late will result in the grade being reduced by 50%. Late Project assignments will not be accepted after 11:59 pm Central Time on the Sunday night the week after the submission is due.

Course Evaluation

You will have the opportunity to evaluate the course near the end of the session. Course evaluations will open on Sunday of Week 5 and will remain open until Thursday of Week 7. A link will be sent to your CougarMail that will allow you to access the evaluation. Be assured that the evaluations are anonymous and that your instructor will not be able to see them until after final grades are submitted.

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Additional Resources

Orientation for New Students

This course is offered online, using course management software provided by Desire2Learn and Columbia College. The Student Manual provides details about taking an online course at Columbia College. You may also want to visit the course demonstration to view a sample course before this one opens.

Technical Support

If you have problems accessing the course or posting your assignments, contact your instructor, the Columbia College Helpdesk, or the D2L Helpdesk for assistance. Contact information is also available within the online course environment.

CCHelpDesk@ccis.edu

800-231-2391 ex. 4357

helpdesk@desire2learn.com

877-325-7778

Online Tutoring

Smarthinking is a free online tutoring service available to all Columbia College students.

Smarthinking provides real-time online tutoring and homework help for Math, English, and Writing. The Writing Center can be used for writing assistance in any course.

Smarthinking also provides access to live tutorials in writing and math, as well as a full range of study resources, including writing manuals, sample problems, and study skills manuals. You can access the service from wherever you have a connection to the Internet. I encourage you to take advantage of this free service provided by the college.

Access Smarthinking through CougarTrack under Students->Academics->Academic Resources.

Grading Criteria

Discussion

Criteria Description Points

Initial Post

Initial post submitted by midnight on the night due according to the schedule. Posting answers the question posed or provides substantive comments on the issue and reflects an understanding of the readings.

5

Responses

Reponses to at least two classmates are posted by midnight on the day indicated in the assignment schedule. Responses are posted on separate days. (Logging in and posting all three posts on the same day will not demonstrate substantive

engagement with your classmates.)

Responses are substantive and help to advance the discussion by reflecting what is of value in another’s post or by posing questions to engage classmates in further discussion.

5

Project

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Ideas Central idea/thesis is clearly communicated; analysis is clear and logical 40 Organization Uses a logical structure; sophisticated transitional sentences guide the reader _{through the chain of reasoning} 40

Supporting

Data Uses evidence appropriately and effectively, providing sufficient evidence and explanation to convince. 40

Accuracy Calculations are accurate. 50

Mechanics Almost entirely free of spelling, punctuation, and grammatical errors 10 Punctuality Each component and the final project are submitted on time 20