Servizi per la didattica
PORTALE DELLA DIDATTICA

Accounting and Corporate finance

01PEBPH

A.A. 2019/20

Course Language

Inglese

Course degree

Master of science-level of the Bologna process in Engineering And Management - Torino

Course structure
Teaching Hours
Lezioni 80
Teachers
Teacher Status SSD h.Les h.Ex h.Lab h.Tut Years teaching
Ughetto Elisa Professore Associato ING-IND/35 80 0 0 0 8
Teaching assistant
Espandi

Context
SSD CFU Activities Area context
ING-IND/35 8 B - Caratterizzanti Ingegneria gestionale
2019/20
This course, which is compulsory for the Master of Science in Engineering and Management, is designed to provide an understanding of the fundamentals of financial accounting and investment analysis for prospective users of corporate financial information, such as investors, creditors, employees, and other stakeholders and for prospective entrepreneurs taking investment decisions. The first part of the course is devoted to the fundamental concepts and methods of financial accounting. The accounting process will be presented according to a managerial perspective, highlighting the steps at the basis of transaction analysis and the impact of specific economic transactions on firms’ indicators of profitability, liquidity and solvency. The second part of the course will address both basic and advanced techniques for capital budgeting and investment analysis and will review the fundamentals of corporate finance theory.
The role of accounting and corporate finance is to provide information to investors, policy-makers, regulators, and firm managers to facilitate the allocation of resources and corporate investment decisions. This course, which is compulsory for the Master of Science in Engineering and Management, is designed to provide an understanding of the fundamentals of financial accounting and investment analysis for prospective users of corporate financial information. It will help students to understand the accounting process, as well as capital budgeting and investment analysis techniques and to develop skills necessary to evaluate an enterprise’s financial position and its operating, investing and financing activities. Throughout the course, students will understand financial statements and the real-world implications of financial accounting for future managers. The first part of the course is devoted to the fundamental concepts and methods of financial accounting. The accounting process will be presented according to a managerial perspective, highlighting the steps at the basis of transaction analysis and the impact of specific economic transactions on firms’ indicators of profitability, liquidity and solvency. This part of the course will emphasize the measurement concepts and the mechanics of moving from business transactions to the principal financial statements: balance sheet, income statement, and statement of cash flows. Focusing on generally accepted accounting practices (GAAP), students will learn how to deal with accounting practices, such as the timing of revenue recognition, inventory valuation, and measuring the amount and cost of debt financing. The second part of the course will address both basic and advanced techniques for capital budgeting and investment analysis and will review the fundamentals of corporate finance theory. The objective of this second part is to provide a framework, concepts, and tools for analyzing corporate finance problems and issues, based on the fundamental principles of modern financial theory, with an understanding of application to “real-world” situations. The approach is rigorous and analytical. Topics covered will include discounted cash flow techniques, cash flow development and analysis, required returns and the cost of capital, corporate capital budgeting, capital structure theory.
The specific learning outcomes of the course are the following ones: 1. to provide an understanding of how economic events such as operating activities, corporate investments, and financing transactions are recorded in the three main company financial statements (the income statement, balance sheet, and statement of cash flows). 2. to provide an understanding of how most of the information provided by companies in their financial statements reflect corporate decision making and how investors can use financial statement analysis to support investment decisions 3. to provide an in-depth knowledge of the techniques of financial accounting 4. to provide the technical and theoretical contents to understand the dynamics concerning investment decisions, capital structure choices and financial markets conditions At the end of the course the student will be endowed with the fundamental methodological and theoretical competences to evaluate firm performances on the basis of financial statement analysis, to understand the relations between investment planning, and corporate financing decisions.
The course gives students the necessary background to: (1) understand the concepts and measurements that underlie financial statements; (2) develop the skills needed to analyze financial statements effectively; (3) gain an understanding of the choices enterprises make in reporting the results of their business activities; 4) understand capital budgeting and investment decisions; 5) develop a knowledge of the main corporate finance instruments that firms use to fund their operating activities. The course will allow students to get a solid foundation for using financial statement information and for understanding investment decisions, which are assumed to be important dimensions in their future careers in marketing, finance, banking, manufacturing, human resources, sales, information systems and other areas of management. The specific learning outcomes of the course are the following ones: 1. to provide an understanding of how economic events such as operating activities, corporate investments, and financing transactions are recorded in the three main company financial statements (the income statement, balance sheet, and statement of cash flows); 2. to provide an understanding of how most of the information provided by companies in their financial statements reflect corporate decision making and how investors can use financial statement analysis to support investment decisions; 3. to provide an in-depth knowledge of the techniques of financial accounting; 4. to provide the technical and theoretical contents to understand the dynamics concerning investment decisions, capital structure choices and financial markets conditions. At the end of the course the student will be endowed with the fundamental methodological and theoretical competences to evaluate firm performances on the basis of financial statement analysis, and to understand the relations between investment planning and corporate financing decisions.
A basic knowledge of financial accounting concepts and techniques is assumed. This should normally be obtained by graduating with a bachelors degree in management or a comparable education. Another requirement is to have a sufficient background in mathematical and statistical analysis.
A basic knowledge of financial accounting concepts and techniques is assumed. This should normally be obtained by graduating with a bachelor degree in management or a comparable education. Another requirement is to have a sufficient background in mathematical and statistical analysis. Students are expected to be facile in basic spreadsheet skills (Microsoft Excel or the equivalent). Students are also expected to own, know how to use, and bring to class a financial calculator.
The first part of the course is devoted to the fundamental concepts and methods of financial accounting. The second part of the course will address both basic and advanced techniques for capital budgeting and investment analysis and will review the fundamentals of corporate finance theory. First part: 1. Financial accounting: principles and methods 2. The accounting process: transaction analysis and end-of period adjustments 3. The structure of the balance sheet statement 4. The income statement and its classifications 5. The cashflow statement 6. The analysis of financial statements Second part: 1. Fundamentals of actuarial mathematics 2. Basic theory of interest 3. Capital budgeting: computation of cashflows, Discounted Cash Flow method, Internal Rate of Return, Annual Cost Method 4. Fixed income securities: their evaluation and their use by companies. 5. Bonds: typologies, principles for pricing, yield, duration and portfolio immunization. 6. Term structure of interest rates 7. Dividend discount model 8. Mean-variance portfolio theory. 9. Risk and return: the Capital Asset Pricing Model and its applications 10. Capital budgeting in the indebted company: Capital structure and the Modigliani-Miller theory. 11. Evaluation methods: WACC, Flow to Equity, Adjusted Present Value
The first part of the course is devoted to the fundamental concepts and methods of financial accounting. The second part of the course will address both basic and advanced techniques for capital budgeting and investment analysis and will review the fundamentals of corporate finance theory. First part: 1. Financial accounting: principles and methods. This part will discuss the role of accounting information in the functioning of capital markets; 2. The accounting process: transaction analysis and end-of period adjustments; 3. The structure of the balance sheet statement. This part will be devoted to the description of the types of information provided by the three principal financial statements and how firms might use this information in managing and evaluating a business; 4. The income statement and its classifications. In this part students will understand differences between the cash basis and the accrual basis of income recognition; 5. The cashflow statement. Students will understand the rationale for, and the information value of, the statement of cash flows. They will develop skills in transforming income statement data to cash flow data and vice versa; 6. The analysis of financial statements. This part will introduce tools for analyzing a firm's overall profitability, liquidity and solvency and examine how financial ratios provide information about the economics and strategy of a business. Second part: 1. Fundamentals of actuarial mathematics. This part will discuss the concepts of present and future value of single amounts and cash flow streams, perpetuities and annuities; 2. Basic theory of interest. This part will discuss the difference between simple and compound interest; 3. Capital budgeting: computation of cashflows, Net present value, Internal rate of return, Payback method; 4. Fixed income securities: their evaluation and their use by companies; 5. Bonds: typologies, principles for pricing, yield, duration and portfolio immunization. This part will overview different typologies of bonds, how to calculate a bond price and the yield to maturity, the concept of duration of a bond and of a bond portfolio, the price-yield curve; 6. Term structure of interest rates. This part will discuss the relationship between yields and bond risk, the yield curve, the concepts of spot rates and forward rates; 7. Dividend discount model. This part will deal with stocks when firms have growth opportunities; 8. Mean-variance portfolio theory. This part will introduce the concept of diversification of risk and discuss the relationship between risk and return of securities; 9. Risk and return: the Capital Asset Pricing Model and its applications. This part will illustrate the one fund theorem, the security market line, the capital market line, the concept of Beta and of systematic risk; 10. Capital budgeting in the indebted company: Capital structure and the Modigliani-Miller theory. This part will explain the cost of equity capital and the different theories of capital structure (Modigliani and Miller with and without corporate taxes, and the static trade-off model); 11. Evaluation methods: WACC, Flow to Equity, Adjusted Present Value. This part will illustrate the capital budgeting for a levered firm.
The lectures will be made of both frontal lectures and exercises . They will be "interactive" in that the instructor will periodically ask students to pause the presentation and make classroom exercises on the different modules taught. It is forseen a project work concerning the analysis of a company's financial statements and an oral presentation of the project work to the class room.
The lectures will be made of both frontal lectures and exercises. They will be "interactive" in that the instructor will periodically ask students to pause the presentation and make classroom exercises on the different modules taught. There will be interactive case discussions based on analysis of actual companies’ financial statements. Accordingly, the course provides an opportunity to develop skills necessary to critically evaluate firms’ actions and the efficiency with which they have managed their resources. Class preparation consists of (1) text readings, (2) assigned problems, and/or (3) cases provided by the teacher. Students are expected to participate constructively in all class discussions.
1. Libby, Libby, Short, Financial Accounting, fourth edition, Mc Graw Hill Irwin 2. Ross, Westerfield, Jaffe, Corporate Finance, seventh edition, Mc Graw Hill Irwin 3. Slides Integration
1. Libby, Libby, Short, Financial Accounting, eight edition, Mc Graw Hill Irwin 2. Ross, Westerfield, Jaffe, Corporate Finance, twelfth edition, Mc Graw Hill Irwin 3. Slides Integration
Modalità di esame: Prova scritta (in aula); Progetto di gruppo;
The exam is based on a written test of 2 hours and a project group.
Exam: Written test; Group project;
The exam is based on a written on line test that will last 40/45 minutes. All exams must be taken on the indicated date. Students who perform poorly on one examination will have the option of taking an alternative final exam. Four exam attempts can be taken during the academic year. The written test will include true/false and multiple-choice questions and problems. The written test is made of two parts: the first part on financial accounting and the second part on corporate finance. They will both count for half of the total score. Each question will be assigned 1 point and the maximum score is 30. The questions will be either on the theoretical aspects covered by the course and on exercises and problems that students have to solve. Feedback on the correct answers after the test is taken will be provided. Examinations will be closed book and notes. Hand-held calculators may be used for mathematical calculations only. Final marks can only be accepted or rejected and no freezing of the mark is possible. The exam is exclusively written and no oral examination is foreseen.


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