21857 Financial Management I (Dirección Financiera I)
Universitat Pompeu Fabra
21857 Financial Management I (Dirección Financiera I)
Degree: Degree in Management
Year: 3rd
Quarter: Fall (1st quarter)
Number of ECTS: 5
Teaching languages: English / Spanish
INTRODUCTION
Financial Management I and II address the two main decisions in the financial
management of the company: investment decisions, regarding how to use
company resources for productive projects, and financing decisions, which focus
on obtaining the necessary resources to finance investments. Financial
Management I focuses on investment decisions, whereas the financing decisions
will be studied in Financial Management II.
The main focus of the course is the analysis of investment decisions. We will use
concepts of asset valuation (discussed in Financial Economics / Economía
Financiera) under certainty and uncertainty, and will apply them to investment
decision analysis within the corporation. Emphasis will be placed on the calculation
of the cash flows from the projects, the choice of the cost of capital and the final
selection of the portfolio of investment projects. In more complex settings
(decision-making contingent on other future decisions) more advanced analysis
techniques will be introduced. Finally, if time allows, some sessions will be devoted
to the analysis of the decision-maker herself. The CFO is a human being with
biases and attitudes that may not be fully aligned with the rationality framework
assumed by traditional techniques.
PREREQUISITES
This course is part of the curriculum of the third and fourth years. The courses
taken in the first two years- especially Financial Mathematics, Financial Statements
Analysis and Financial Economics– provide the necessary foundation for the
material covered in Financial Management I. Students should review the basic
concepts of the above mentioned courses before the start of the course. However,
some time will be devoted in class to reviewing them.
21857 Financial Management I (Dirección Financiera I)
Competencies
The competencies involved in the plan for the course are the following:
Previous competencies
- Knowledge of the working of the financial system in general and its
relationship with the macroeconomy, with special attention to the financial
markets.
- Knowledge of the main types of financial instruments.
- Knowledge of basic concepts of analysis of the time value of money
(Financial mathematics).
- Knowledge of basic concepts of asset pricing in certainty and uncertainty:
pricing techniques based on no-arbitrage, mean variance analysis (Financial
Economics).
General competencies
- G1. Understand and interpret written texts of academic level.
- G7. Develop the capacity of independent reasoning.
- G9. Acquire consolidated habits of self-discipline and rigor in carrying out
academic work, as well as learning to correctly organize and schedule such
work.
- G10. Have a proactive attitude towards learning.
- G11. Be able to apply, with the appropriate flexibility and creativity, the
acquired knowledge to new contexts and situations.
- G12. Be able to progress in the learning process in an independent and
continuous manner.
- G13. Show adequate proficiency to move on to the professional world.
Specific competencies
- Capacity to calculate the projected cash-flows of an investment project.
- Knowledge of the concepts involved in the calculation of the relevant cost of
capital for an investment project.
- Techniques of structuring and analyzing a complex decision which involves
future contingent decisions and future uncertainties.
- Capacity to elaborate the capital budget of a company from its investment
decisions.
- Knowledge of the main biases and personal characteristics of the decisionmaker which affect the process of decision making.
Horizontal competencies
- Capacity to search for the relevant information in public or business
sources.
- Capacity to summarize and communicate to general audiences the
conclusions from any analysis carried out.
- Team-work.
21857 Financial Management I (Dirección Financiera I)
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Translating the conclusions from the analysis into economic and business
decision making.
Teaching and other learning activities
The teaching activities are organized in 20 lectures of 1.5 hours and 6 seminars of
1.5 hours throughout the course of ten weeks.
Additionally, both the lectures and the seminars will be prepared through personal
study and the resolution –normally in teams of 3-5 components- of the different
tasks assigned.
The lectures will develop the concepts and methodologies which make up the five
main topics of the syllabus. These lectures are based on the recommended
textbooks (especially, BDm), but the professor has already processed this material
in the form of a set of presentations which will be available to the students. Both
the textbooks and presentations should be the relevant material for the preparation
of the lectures.
Several problem sets will be assigned which cover the practical issues in the
lectures. These problem sets may or may not need to be turned in before the
seminars, but students will be expected to participate actively in the class
resolution of the problem sets.
The seminars will be devoted to solving the most relevant exercises contained in
the problem sets, but at the same time the professors will try to complement the
solutions with some complementary material of practical importance. Students are
expected to participate actively in the discussion of such practical material.
Finally, students are required to sit for a final exam. The format and content will be
explicitly discussed in the last lecture of the course.
Information sources and teaching materials
The resources /materials that students will need to use are the following:
- Course PDA and syllabus: in order to know the objectives, course
description and evaluation criteria. Accessible through Campus Global.
- Teaching material: presentations which summarize the theory and some
additional material, as well as which elaborate on some specific issues.
Accessible through Campus Global. It is important to access Campus
Global frequently to obtain the most up-to-date version of all material.
21857 Financial Management I (Dirección Financiera I)
ASSESSMENT
Ordinary assessment
To pass the course, you must earn at least 50 points out of 100, according to the
following distribution:
Final exam: 80 points (a minimum of 32 is required to pass the course).
Continuous assessment: 20 points. These points will be earned through seminar
attendance and through the resolution (in groups) of the exercises assigned for
each of the seminars. The professor will explain in more detail this part of the
assessment in class.
Extraordinary assessment
If the student has not passed the class in the ordinary assessment, he/she can
make-up for the grade according to the following conditions:
Final exam: if the student fails the final exam, he/she may attend a make-up exam
(specific day, time and classroom will be announced in due time). To be able to
attend the special exam, the student must have taken the regular final exam and
received a grade.
Continuous assessment (seminar participation and group assignment): this part,
because of its nature, cannot be recovered.
Assessment guidelines for UPF students in exchange programs
UPF students who are enrolled in the course but are participating in exchange
programs are subject to the same assessment criteria as the other students. This
implies that if they cannot take part in the continuous assessment, the maximum
grade they can obtain is 80 points.
Textbooks
BERK, J.; DEMARZO, P. Corporate Finance. Pearson (BDm).
BREALEY, R. A.; MYERS, S. C.; ALLEN, F. Principles of corporate finance
McGraw-Hill. (BMA).
21857 Financial Management I (Dirección Financiera I)
Session outline
Session
Content
Theory 2
Basic concepts and review
Introduction to financial management: the firm and the
CFO
The financial statements: a source of information
Theory 3
The time value of money
Theory 4
Basic concepts of asset pricing
Theory 1
Theory 5
Theory 6
Theory 7
Theory 8
Seminar 1
Theory 9
Investment decisions
Criteria for investment decisions: accounting return,
payback, NPV, IRR
Extensions:
- NPV vs. IRR
- Mutually exclusive projects, resource constraints.
More on criteria for investment decisions
Capital budgeting (I): computing project cash-flows
Capital budgeting (II): some adjustments to cash flows and
project analysis
Theory 11
Problem set 1
Capital budgeting (III): practical issues in building a capital
budget
A practical example: investment in the stock market
Problem set 2
Decisiones de inversión en incertidumbre
Risk and its incorporation in investment decisions
Theory 12
Computing the cost of capital (I)
Seminar 3
Theory 13
Problem set 3
Computing the cost of capital (I)
Theory 14
Complex decisions and real options
Analysis of complex decisions (I)
Seminar 4
Theory 15
Problem set 4
Analysis of complex decisions (II)
Theory 16
Seminar 5
Theory 17
Analysis of complex decisions (III)
Problem set 5
Problems of complex decisions
Investor behavior
Risk attitude and psychology - investor biases
Problem set 6
Decisions that extend over time
Final overview
Theory 10
Seminar 2
Theory 18
Seminar 6
Theory 19
Theory 20
Chapters
1 (BDm)
1 (BMA)
2 (BDm)
29 (BMA)
4 (BDm)
3 (BMA)
3, 8, 9 (BDm)
4 (BMA)
Week
1
1
2
2
6 (BDm)
5 (BMA)
6 (BDm)
5 (BMA)
3
6, 7 (BDm)
6 (BMA)
7 (BDm)
6, 10.1
(BMA)
4
11, 12
(BMA)
9 (BDm))
10,11 (BDm)
7,8 (BMA)
12 (BDm)
9 (BMA)
12 (BDm)
9 (BMA)
22 (BDm)
10.3,22(BMA)
22 (BDm)
10.3,22(BMA)
10.3 (BMA)
13 (BDm)
3
4
4
5
5
6
6
7
7
7
8
8
8
9
9
5
10
10