FIN 4203 Advanced Financial Management Quiz

Course Overview

• Course Code: FIN 4203
• Focus: Advanced Financial Management
• Level: Undergraduate

Key Topics

1. Capital Budgeting

   • Techniques: NPV, IRR, payback period.
   • Risk Analysis: Sensitivity and scenario analysis.
   • Cash Flow Forecasting: Importance and methods.

2. Financial Analysis

   • Ratio Analysis: Liquidity, profitability, efficiency, leverage ratios.
   • Trend Analysis: Evaluating performance over time.
   • Common Size Analysis: Comparing financial statements.

3. Cost of Capital

   • Components: Cost of equity, cost of debt, WACC (Weighted Average Cost of Capital).
   • Calculation Methods: CAPM (Capital Asset Pricing Model), DCF (Discounted Cash Flow).

4. Working Capital Management

   • Components: Inventory management, accounts receivable, accounts payable.
   • Strategies: Just-in-time inventory, cash conversion cycle optimization.

5. Capital Structure

   • Theories: Modigliani-Miller Proposition, trade-off theory, pecking order theory.
   • Impact of Debt: Effects on business risk and cost of capital.

6. Dividend Policy

   • Types of Dividends: Cash dividends, stock dividends.
   • Policies: Stable, residual, and zero dividend policies.
   • Factors Influencing Dividends: Earnings, cash flow, growth opportunities.

7. Mergers and Acquisitions

   • Types: Horizontal, vertical, conglomerate mergers.
   • Valuation Methods: Comparable company analysis, precedent transactions, DCF.
   • Legal and Regulatory Considerations: Antitrust laws, due diligence.

8. Risk Management

   • Types of Risks: Market risk, credit risk, operational risk.
   • Hedging Techniques: Derivatives, insurance, diversification.

9. International Finance

   • Foreign Exchange Markets: Currency exposure, exchange rates.
   • International Capital Budgeting: Adjustments for risk and return in different markets.

Skills Developed

• Financial decision-making and analysis.
• Strategic thinking regarding capital investments and financing.
• Application of financial theories to real-world scenarios.

Exam Preparation Tips

• Understand key financial concepts and their applications.
• Practice calculations for NPV, IRR, and WACC.
• Analyze case studies related to mergers, acquisitions, and financial strategies.
• Review past exam papers and quizzes for question formats and key areas.

Capital Budgeting

• Commonly used techniques for evaluating capital projects include Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period.
• Risk Analysis evaluates the potential impact of uncertainties on a project's profitability.
  • This involves sensitivity and scenario analyses.
• Cash flow forecasting is crucial for capital budgeting
  • There are multiple methods to forecast cash flows accurately.

Financial Analysis

• Ratio analysis provides insights into a firm's liquidity, profitability, efficiency, and leverage.
• Trend analysis helps assess performance over time by comparing financial data from different periods
• Common Size analysis allows companies to compare its financial statement line items to those of other companies.

Cost of Capital

• Consists of the cost of equity, cost of debt, and the weighted average cost of capital (WACC).
• The Capital Asset Pricing Model (CAPM) and Discounted Cash Flow (DCF) are common methods to calculate the cost of equity.

Working Capital Management

• Working capital management focuses on optimizing the management of current assets and liabilities.
• Key components include:
  • Inventory management
  • Accounts receivables
  • Accounts payable
• Effective strategies include just-in-time inventory management and optimizing the cash conversion cycle.

Capital Structure

• The Modigliani-Miller Proposition, trade-off theory, and pecking order theory explain the relationship between debt financing and firm value.
• Debt financing can affect business risk and the cost of capital.

Dividend Policy

• Companies can distribute profits to shareholders through cash dividends or stock dividends.
• Dividend policies can be categorized as stable, residual, or zero-dividend policies.
• Factors influencing dividend decisions include earnings, cash flow, and growth opportunities.

Mergers and Acquisitions

• Horizontal, vertical, and conglomerate mergers are common types of M&A deals.
• Valuation methods for M&A deals include comparable company analysis, precedent transactions, and discounted cash flow (DCF).
• Regulatory considerations such as antitrust laws and due diligence need to be carefully assessed.

Risk Management

• Key types of financial risk include:
  • Market risk
  • Credit risk
  • Operational risk
• Companies can use hedging techniques, such as derivatives, insurance, and diversification to mitigate risk.

International Finance

• Currency exposure and exchange rates are critical aspects of international finance.
• When making capital budgeting decisions in international markets, adjustments for risk and return are essential.

Test your knowledge on advanced financial management concepts covered in FIN 4203. This quiz will challenge you with questions on capital budgeting, financial analysis, cost of capital, working capital management, and capital structure. Assess your understanding of these key financial strategies and techniques.