Finance 321 Leeds

Finance 321 at the Leeds School of Business, University of Colorado Boulder, is a core course typically titled something along the lines of “Corporate Finance” or “Financial Management.” It builds upon introductory financial accounting and economics principles to provide a foundation in the theories and practices of financial decision-making within a corporate context. This course is usually a pre-requisite for more advanced finance electives.

The overarching goal of Finance 321 is to equip students with the analytical tools and conceptual understanding necessary to make sound financial judgments from the perspective of a corporation. This includes investment decisions (capital budgeting), financing decisions (debt vs. equity), and working capital management. Students learn how to apply these concepts to maximize shareholder value.

Key topics typically covered in Finance 321 include:

• Time Value of Money: This is a fundamental concept, understanding how the value of money changes over time due to interest rates. Students learn to calculate present values, future values, annuities, and perpetuities.
• Valuation: The course delves into valuing assets, including stocks and bonds. Techniques like discounted cash flow (DCF) analysis, relative valuation, and the Capital Asset Pricing Model (CAPM) are typically explored. Understanding risk and its impact on required rates of return is a critical component.
• Capital Budgeting: Students learn how to evaluate potential investment projects using techniques like Net Present Value (NPV), Internal Rate of Return (IRR), and payback period. The course emphasizes the importance of identifying relevant cash flows and accounting for risk.
• Cost of Capital: Determining the cost of capital, which is the minimum rate of return a company must earn on its investments to satisfy its investors, is crucial. Students learn how to calculate the weighted average cost of capital (WACC).
• Capital Structure: This section explores the optimal mix of debt and equity financing for a firm. Topics include the Modigliani-Miller theorems (with and without taxes), trade-off theory, and pecking order theory. Students analyze the impact of leverage on firm value and risk.
• Working Capital Management: Managing short-term assets and liabilities, such as inventory, accounts receivable, and accounts payable, is also covered. Students learn techniques for optimizing cash flow and minimizing the risk of financial distress.
• Dividend Policy: The course might touch on dividend policy and stock repurchases, exploring the factors that influence a company’s decisions on how to distribute profits to shareholders.

The course typically involves a combination of lectures, readings, problem sets, and case studies. Problem sets provide opportunities for students to apply the concepts learned in class, while case studies allow them to analyze real-world financial decisions. Exams often require both conceptual understanding and the ability to solve quantitative problems.

Successful completion of Finance 321 provides a solid foundation for students pursuing careers in corporate finance, investment banking, portfolio management, and other financial roles. It is also valuable for those pursuing careers in other business disciplines, as it provides a framework for understanding financial decision-making within an organization.