Finance of the Firm 2400-EP2FP
1. Business models in the social sciences and their relationships - review
2. Types and functions of the business. Stakeholders and their links. The importance of information asymmetry, agency problems, moral hazard for the functioning of companies.
3. Financial flows in enterprises - sources and disposals. Measurement results of the economic activity of enterprises. The concept of limited liability. Bankruptcy. Observations on the relationship with the option instruments.
4. The financial data on companies. Sources and types: Resource data, streaming and periodically increasing.
5. Financial indicators - typology. Interpretation. Methods of analysis of changes in indicators. Du Pont model.
6. The value of the company in the deterministic terms. Model of Robinson Crusoe and comments of the extensions. The concept of NPV.
7. Deterministic streams of income. Gordon model. Extensions to the case of multiple rates of growth of dividends.
8. The concepts of risk and uncertainty. Sources of risk in business operations. Leverage. The risk of a utility function. Measures of risk.
9. Basics of portfolio theory. The expected value and variance of the portfolio. Wallets effective. Markovitz paradigm. CML.
10. CAPM. The simplest method of estimating the model parameters.
11. States of the world. Payoff matrix. The concept of arbitrage. Examples. Basics of valuation of assets in the absence of arbitrage - the basic valuation equation
12. Methods for business valuation: income/CF, book value based, comparative, mixed - the main assumptions and examples
Type of course
Student has knowledge of the various conceptual models of business and can put a financial model in this context. Student knows and understands the importance of financial analysis: groups of stakeholders, ownership structure and the principles of settlement of claims (residual claims).
Student knows the various organizational and legal forms of company.
Student has knowledge about the possible functions of the business. Student knows the principles of construction and properties of various measures of economic performance of enterprises, including earnings, economic value added, EBIT etc.
Student knows the theoretical basis of the concept of NPV in the deterministic case (the model Robinson Crusoe and development). Student knows the basic methods of company valuation.
Student knows the deterministic model of valuation of the company based on the discounted stream of dividends. The student knows the basic valuation models for fixed or stepped foot increase in dividends - Gordon model and generalizations.
Student knows and understands the importance of risk in enterprise value analysis. Student knows the basics Markovitz approach. Student knows the principles of constructing portfolios by investors. Student knows the concept of the Capital Market Line. Student knows the concept of an efficient portfolio and the market portfolio.
Student knows basic CAPM model. Student knows the basic procedures for determining the parameters of the CAPM model.
Student knows the basics of the option theory and its application in business valuation models. Student knows the concept of market efficiency and the effectiveness of different types. The student has knowledge of issuance of shares principles.
Student understands the concept of capital structure. Student has knowledge about the impact of leverage on the volatility of financial results. Student understands the concept of the tax shield. Student knows the basic theories of the impact of leverage on the value of the company, including the paradigm of M-M.
Student knows the concept of cost of capital. Student understands the concept of the weighted cost of capital. Student knows and understands the basis of dividend policy, and theories of the impact of this policy on company value. Student knows and understands the factors of success / failure in business, including the causes of bankruptcies
Student knows how to identify the stakeholders of the company and their role and behavior that affect the financial situation of the company.
Student is able to estimate and interprets various measures of company financial results.
Student knows how to make a valuation of a company based on the model of a fixed rate of dividend growth.
Student is able to estimate the CAPM model, and can use this model to calculate the cost of equity.
Student knows how to calculate the weighted cost of capital based on the company's financial characteristics and interpret the results.
Student is able to calculate the thresholds of operational and financial viability for the enterprise.
Student knows how to make a comparative valuation of listed companies based on fundamental valuation methods.
Student is able to estimate, in simple situations, the optimal level of leverage.
Student knows how to analyze the main factors of success / failure of companies
C. Social competence:
Student understands the social responsibility of business, including the importance of integrity and honesty in business.
Students can take a job in non-financial business economic department.
Student is able to think and act in an entrepreneurial manner when decide to start their own business. In particular, knows how to assess the risks associated with different financing strategies.
Student is aware of and alert to the so-called cardinal mistakes in running a business.
S_W01, S_W02, S_W03, S_W04, S_U01, S_U02, S_U03, S_U04, S_K01
Written exam - multiple choice, containing 25 questions with four possible answers. Time of writing test - 50 min.
1. R.Brealey, S.Myers, F.Allen, Principles of Corporate Finance, Global edition, McGraw-Hill, 2011
Information on level of this course, year of study and semester when the course unit is delivered, types and amount of class hours - can be found in course structure diagrams of apropriate study programmes. This course is related to the following study programmes:
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