Corporate Finance

Curriculum

• Working Capital Management

  16 Lessons 63 Min

  The course begins with the fundamentals of corporate finance. We study the sources of liquidity and their impact on a company’s liquidity position. Next, you will learn how to calculate the most common liquidity ratios, which will allow you to evaluate a company’s overall efficiency. Then, we explain the term net daily cash position and the types of cash flows that have an impact on it. We also give attention to short-term return measures and policy guidelines. You will learn how to evaluate a company’s processes for the management of accounts receivable, inventory, and accounts payable. And finally, we examine the short-term funding sources a company could rely on.

  Course Introduction Free Working Capital Management (Definition) Free Liquidity Management Free Liquidity Measures Asset Management Ratios Payables Turnover Ratio Liquidity Analysis (Example) Operating and Cash Conversion Cycles Net Daily Cash Position Yields on short-term securities Investment Policy Statement Accounts Receivable Management Inventory Management Accounts Payable Management Short-Term Bank Funding Sources Short-term Non-Bank Funding Sources
• Capital Budgeting

  14 Lessons 66 Min

  This section covers the basic principles of capital budgeting. We describe the capital budgeting process, the categories of capital projects, and the difference between independent and mutually exclusive projects. Next, you will learn how to make investment decisions based on some of the most frequently used measures: Net Present Value, Internal Rate of Return, payback period, and profitability index. Lastly, we examine in detail the advantages and disadvantages of Net Present Value and Internal Rate of Return.

  The Capital Budgeting Process Capital Budgeting (Basic Principles) Engaging with Multiple Projects at a Time Net Present Value (NPV) Net Present Value: Example Internal Rate of Return (IRR) Payback Period Discounted Payback Period (DPBP) Average Accounting Rate of Return (AAR) Profitability Index (PI) NPV Profile NPV vs IRR Problems Associated with IRR The Relation Between NPV and Share Price
• Cost of Capital

  16 Lessons 72 Min

  This section of the Corporate Finance course is dedicated to the cost of capital. We explain how to calculate a company’s Weighted Average Cost of Capital (WACC) and how taxes affect the various sources of capital. Then, we describe the use of target capital structure in the WACC calculation. You will how the Marginal Cost of Capital affects the investment opportunity schedule and a project’s NPV. Next, we examine the ways to calculate the cost of equity, preferred equity, and debt. At the end of the section, we discuss a project’s beta and flotation costs.

  3.1 The Weighted Average Cost of Capital (WACC) Effect of Taxes on the Cost of Capital Use of Target Capital Structure in Estimating WACC Marginal Cost of Capital (MCC) The MCC's Role in Determining the NPV Cost of Debt Cost of Preferred Stock Cost of Equity (using CAPM) CAPM (Components) Cost of Equity (using the Dividend Discount Model) Cost of Equity (using the Bond Yield Plus Risk Premium Approach) Calculate and Interpret Beta Calculate a Project's Beta Estimate the Cost of Equity for Developing Countries Marginal Cost of Capital Schedule Flotation Costs
• Capital Budgeting: Practical Example

  12 Lessons 45 Min

  In this section, you will apply everything you have learned so far to a fictional case study in which Home Depot decides to expand its operations from North America to Europe and open its first store in France. In this practical exercise, we will build a complete capital budgeting model in Excel and learn how to forecast revenue and various types of expenses. We will also prepare a fixed asset roll forward schedule and calculate the cash impact of extra working capital and the projected cash flows. Lastly, we will perform a sensitivity analysis and explore the factors behind these results.

  Case Study (Introduction) Organizing Inputs Into Drivers Sheet Sales Forecast Sheet Preparing a Fixed Asset Rollforward Schedule Calculate Cash Impact of Extra Working Capital Debt Repayments and Interest Expenses Project's P&L Sheet Project’s Cash Flows WACC Calculate Beta in Excel Discounting Project Cash Flows Performance Evaluation and Sensitivity Analysis
• Measures of Leverage

  8 Lessons 31 Min

  Next, the Corporate Finance course covers the definition of leverage and the different types of risks a company faces. We calculate and interpret the degrees of operating and financial leverage, which help us determine a company’s total leverage. Next, we analyze the effects of financial leverage on a company’s net income and return on equity. Towards the end, we explain how to calculate the breakeven quantity of sales by taking into account a firm’s fixed and variable costs.

  Measures of Leverage Business and Financial Risk Calculate the Degree of Operating Leverage (DOL) Calculate the Degree of Financial Leverage (DFL) Calculate the Degree of Total Leverage (DTL) The Effect of Financial Leverage on a Company's NI and ROE Calculate the Breakeven Quantity of Sales Calculate the Operating Breakeven Quantity of Sales
• Corporate Governance and ESG Investing

  13 Lessons 44 Min

  In the last section of the Corporate Finance course, we discuss the components of an effective corporate governance structure. Then, we list some of the major stakeholders and how their opposing interests are balanced through stakeholder management. You will fully understand the structure, composition, and responsibilities of a company’s Board of Directors and the main committees it appoints. And lastly, we discuss the corporate governance factors relevant to investment analysis and the environmental and social causes influencing the investment process.

  Corporate Governance: Description Stakeholder Groups and Their Interests Stakeholder Conflicts Stakeholder Management Governance Mechanisms Board of Directors Board of Directors Committees Factors Influencing Corporate Governance Corporate Governance: Risks and Benefits Principles of Corporate Governance Analysis Environmental Factors and Social Considerations in Investment Analysis ESG Investing ESG Investing vs Fiduciary Duties