Fundamentals of Corporate Finance

Summary

This unit is designed to provide students with a solid understanding of the fundamental concepts of corporate finance. The unit covers the primary objectives in decision making, an introduction to financial statement analysis, and the core principles of investment, financing, and dividend decisions. Understanding these principles is essential for evaluating investment opportunities using various capital budgeting methods, comprehending how to optimise a company's financing strategies, and effectively formulating corporate payout policies. Furthermore, this unit provides insights into the main theories of capital structure and dividend payouts, including the Modigliani-Miller propositions, and explores the impact of taxation, financial distress, and some other market imperfections on financing and dividend policies.

Importance to your Programme

This unit is designed to provide students with a thorough understanding of both the theoretical and practical aspects of corporate finance. As an essential mandatory module in Teaching Block 1 of the MSc Finance and Investment programme, it fulfils the purpose of familiarising students with key corporate finance knowledge. Furthermore, it provides the necessary foundation for students who intend to select Advanced Corporate Finance in TB2, thereby enhancing their appreciation of corporate finance concepts.

Learning Outcomes

After completing this unit successfully, students should be able to:

• Describe, apply and critically evaluate the techniques that firms use for capital budgeting decisions.
• Derive and understand the fundamental theories underpinning firms' capital structure policies.
• Derive and understand the principle theories governing corporate payout policies.

Content

Topics covered include the primary objectives in decision making, an introduction to financial statement analysis, methods of capital budgeting, theories of and factors influencing capital structure and dividend policies.