Introduction to Corporate Finance

Bachelor 2020/2021

Category 'Best Course for Broadening Horizons and Diversity of Knowledge and Skills'

Category 'Best Course for New Knowledge and Skills'

Type: Elective course (HSE University and University of London Parallel Degree Programme in International Relations)

Area of studies: International Relations

Delivered by: Faculty of World Economy and International Affairs

Where: Faculty of World Economy and International Affairs

When: 4 year, 1, 2 module

Mode of studies: offline

Instructors: Фокин Антон Валерьевич, Ella Khromova (Fokina), Darya Litvinova

Language: English

ECTS credits: 4

Contact hours: 32

Full Syllabus

Abstract

The Corporate finance course is an intermediary one-module course for four-year undergraduate students. It is focusing on corporate applications in the international environment. The course develops theoretical and practical frame works for understanding and analyzing major financial problems of modern firm in the market environment. The course is taught in English. Russian is used as supplementary language to explain basic concepts and introduce some Russian terminology. The first part of the course is devoted to principles of accounting. By the end of this part of a course, students are expected to be able to apply a set of accounting concepts to read annual financial report of a corporation and financial ratios to assess its financial position. The second part deals with principles of company valuation and covers the essentials of capital structure and methods of company valuation. It is focused on estimating and forecasting cash flow of a firm in order to calculate its market value.

Learning Objectives

To prepare and analyze companies’ financial statements and financial ratios for decision-making purposes and perform financial planning, applying various models
To conduct quantitative and qualitative research to find and analyze stock information
To perform valuation of a company through multiples and discounted cash flows models
To evaluate the optimal capital structure of a company and analyze its leverage
To make a justified investment decision applying project analysis and evaluation of multiple investment criteria

Expected Learning Outcomes

To develop skills in analyzing corporate behavior in capital markets and the relationship of agent, and principal of raising funds, allocating capital and distributing returns. The course provides necessary knowledge in evaluating different management decisions and their influence on corporate performance and value. It helps develop a strategic understanding of key financial decisions faced by organizations today by putting them into an international context.

Course Contents

Basic Accounting Equation and Balance Sheet
Basic accounting equation. Types of assets: current and fixed, liquid and illiquid, tangible and intangible. Liabilities and their recognition criteria. Types of liabilities. Owner’s capital (equity, retained earnings) and its forms.
Profit and Loss statement
Main sections of Income Statement. Concepts of Revenue, COGS, OPEX, EBITDA, D&A, EBIT, Tax, Net Income. Revenue recognition criteria: Accrual vs Cash basis.
Cash Flow Statement and the link between 3 statements
Types of company’s activities and cash flows: cash flow from operating, investing and financing activities. Net (gross) cash flow. The reconciliation of Net Incometo Cash Flows.The link between 3 statements.
Company Valuation Approaches
Why do you need valuation? Market Capitalization vs Enterprise Value. Market Value vs Book Value. Relative valuation (multiples) vs fundamental valuation (Discounted Cash Flows). Multiples: transaction vs trading; Market Cap based vs EV based, etc.
DCF Model: Cash Flows
The concept of DCF model. Terminal Value. Calculating and forecasting different types of Cash Flows (FCFF, FCFE). Reconciliation of Net income to Cash Flows.
Capital Structure Choice
Basic features of Debt and Equity. The effect of taxes on capital structure. The debt tax shield. Cost of financial distress. Corporate Cost of Capitaland Financial Leverage.
DCF Model: Discount rate
Interest rates and the time value of money. The weighted average cost of capital (WACC) and its components. Return on equity: CAPM, beta unlevered and beta levered from peers or from the market. Return on debt. The financing decision including capital structure theory and the cost of capital.
DCF Model: Construction
Valuation of a currently working company using DCF approach. Comparison of the result to the market.

Assessment Elements

Home assignments
Participation during lectures and classes
Students are expected to attend every lecture and class and participate by contributing to the in-class discussions and problem solving. In the case if a student cannot attend offline lecture and classes due to COVID reasons, the weight of this form of control is transformed to Home Assignments.
Group project
At the end of the course, before the exam week, students are expected to make a group project. Students are subdivided into groups of 4-6 people. Each group illustrates buy side or sell side in an M&A deal. Project can be presented offline during the class or online via Zoom.
Final written exam
Final written exam is held during an exam week. The exam is obligatory and cannot be covered by the cumulative grade. The exam lasts 120 minutes and contains 8 problems that include some essays and problem- solving tasks similar to home assignments and class problems. Those studens who will not be able to attend an offline exam due to COVID reasons will have a separete exam with online proctoring tools.

Interim Assessment

Interim assessment (2 module)
0.3 * Final written exam + 0.4 * Group project + 0.15 * Home assignments + 0.15 * Participation during lectures and classes

Course Syllabus