Course Catalogue

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Financial Management aims to provide students with a thorough understanding of the theory and practice governing corporate financial management.

Lectures: 2 hrs x 20 weeks

Please refer to MyCampus for timetable

Entry to an Honours programme in Business and Management or a GPA of 12 in the level 2 courses listed below for students taking an Honours programme in another subject:
• MGT2010 Business Decision Analysis
• MGT2011 Fundamentals of Human Resource Management
• MGT2012 Services and Operations Management
• MGT2014 Entrepreneurship

None

Students will be required to submit one assignment (20%) at the end of semester 2 and sit a class test at the end of semester 1 (20%) and a 2-hour degree examination (60%).

Reassessments are normally available for all courses, except those which contribute to the Honours classification. For non Honours courses, students are offered reassessment in all or any of the components of assessment if the satisfactory (threshold) grade for the overall course is not achieved at the first attempt. This is normally grade D3 for undergraduate students and grade C3 for postgraduate students. Exceptionally it may not be possible to offer reassessment of some coursework items, in which case the mark achieved at the first attempt will be counted towards the final course grade. Any such exceptions for this course are described below. 

Financial Management aims to provide students with a thorough understanding of the theory and practice governing corporate financial management. The course introduces students to an analysis of security valuation (of bonds, equity and derivative instruments), and the financing decision; should the cash needed for the investment be raised by issuing equity or debt, or by retaining profits in the firm? To make sure these decisions, managers need the guidance of finance theory as well as empirical evidence on issues such as: how will borrowing affect the value of the firm and its share capital? How will the payment of dividends affect the value of the shares and shareholder wealth? This course addresses these and other core questions of financial management, and in doing so, introduces some of the key concepts of modern finance, including portfolio theory and the capital asset pricing model, option pricing theory, market efficiency, and agency theory.

By the end of the course, students should be able to:

1. Demonstrate an understanding of the present value principle, and apply various investment appraisal techniques for investment decision making;

2. Discuss various theories regarding the term structure of interest rates;

3. Calculate the value of bonds, including the interest rate sensitivity (duration);

4. Apply and discuss the Gordon's growth model of share valuation;

5. Discuss the relationship between risk and return;

6. Discuss the concepts of portfolio theory and the capital asset pricing model (CAPM) in non-technical terms;

7. Understand how the CAOM can be used to ascertain the cost of capital in capital budgeting;

8. Discuss the various forms of the efficient market hypothesis (EMH) together with some of the key evidence as to whether the EMH is valid or not;

9. Discuss why companies attach such significance to dividends, and why dividend policy is influenced by taxation, information asymmetry and other market imperfections; 

10. Evaluate the capital structure decision in light of the Modigliani and Miller propositions and subsequent developments;

11. Demonstrate an understanding of the controversy surrounding the use of derivative instruments, and the Black-Scholes option pricing model;

12. Evaluate the various motives for mergers and acquisitions and the role of agency theory in corporate. governance.

Students must submit at least 75% by weight of the components (including examinations) of the course's summative assessment.