Finance 203: Intermediate Financial Concepts

Finance 203 builds upon foundational finance knowledge, delving into more sophisticated concepts and analytical tools. This course equips students with the skills to make informed financial decisions in a variety of contexts, including investment management, corporate finance, and risk management. It moves beyond basic definitions and calculations to explore the nuances and complexities of real-world financial scenarios.

Key Topics Covered:

• Valuation Techniques: Expanding on introductory valuation methods, Finance 203 explores discounted cash flow (DCF) analysis in greater detail, including sensitivity analysis and scenario planning. Relative valuation techniques, such as using price-to-earnings (P/E) and enterprise value-to-EBITDA (EV/EBITDA) ratios, are also covered, allowing for comparisons across companies and industries. Students learn to identify appropriate discount rates and terminal values for accurate valuations.
• Capital Structure and Cost of Capital: This section examines the optimal mix of debt and equity financing for a company. It explores the Modigliani-Miller theorem and its implications, as well as the factors that influence a company's cost of capital, including market conditions, risk profile, and tax considerations. Students learn how to calculate the weighted average cost of capital (WACC) and its use in investment decisions.
• Investment Portfolio Management: The course delves into portfolio diversification, asset allocation, and performance measurement. Students explore different asset classes, including stocks, bonds, and alternative investments. Modern portfolio theory (MPT) and the Capital Asset Pricing Model (CAPM) are examined in detail, providing a framework for constructing efficient portfolios that maximize returns for a given level of risk.
• Derivatives and Risk Management: This module introduces various derivative instruments, such as futures, options, and swaps, and their uses in hedging and speculation. Students learn how to value derivatives and understand their role in managing financial risk. Specific risk management strategies are explored, including interest rate risk, currency risk, and credit risk.
• Financial Modeling: Building practical skills is a crucial component. Students learn to create and analyze financial models using spreadsheet software. These models are used to forecast financial performance, evaluate investment opportunities, and assess the impact of different financial decisions. Sensitivity analysis and scenario planning are integrated into the modeling process.

Learning Outcomes:

Upon successful completion of Finance 203, students will be able to:

• Apply advanced valuation techniques to determine the intrinsic value of assets and companies.
• Analyze capital structure decisions and their impact on a company's cost of capital.
• Construct and manage diversified investment portfolios.
• Utilize derivatives to hedge financial risks.
• Develop and interpret financial models for decision-making.

Prerequisites:

A strong foundation in introductory finance principles (Finance 101 or equivalent) is required. Familiarity with basic accounting concepts and spreadsheet software is also beneficial.

Career Opportunities:

Finance 203 prepares students for a wide range of careers in finance, including financial analysis, investment banking, portfolio management, and corporate finance. The skills and knowledge gained in this course are highly valued by employers in the financial services industry.