Managerial finance

(FINC 474)
Dr. Michael D. Kinsman

(949) 223-2533

July 15, 20157

Attached is your syllabus for Fall, 2017. I am looking forward to working with you to ensure that we have the best possible class in finance, which will allow you to use this material in your business life and as you move forward to the finance classes in your program.

For this class, you will need a financial calculator capable of doing internal rates of return. Any calculator that does present and future value, including Internal Rate of Return, is acceptable. If you are going to purchase a new calculator, I suggest that you purchase one of first two listed below (I do not have a financial interest in HP!):

I have a handout that shows the keystrokes for doing financial problems with each of these calculators. To get a preview of this, check my website, Using HP calculators for financial functions. I will not show them for other calculators--though if you already have a calculator and know how to use it, that will not be a detriment to you. I will not be able to help you learn to use other calculators (because I don't know them). Please come to each class with your calculator.

If you have an old financial calculator at your house that is not one of the ones listed above and you don't know how to use it, please buy a new one--you will use this calculator a lot and the price of a slow start is high.

Buy the calculator at the place it is cheapest. Search the web for good buys.

Using these notes: You should download and carefully read the notes for each week before class. They are in the pull down menu above. If you want to use your iPhone or iPad for the notes, you will need to enter Preferences>Safari in your device Settings. At the bottom of those preferences you will find JavaScript (it needs to be ON) and Block Pop-ups (it needs to be OFF). If you are having trouble downloading the notes, check those settings.

Managerial Finance
FINC 474
Fall 2017

Wednesday, 6-10 pm
OCC room 400

Dr. Michael Kinsman
OCC faculty 438
(949) 223-2533


Catalog description: The official catalog description of this course reads: "This course examines the financial function of the firm, including raising capital, allocating capital, and deciding the capital structure of the firm. The course also examines the firm's working capital decisions and financial markets. Prerequisites: FINC 471 Statistical Methods and Research Design and FINC 472 Accounting."

What's going to happen in this course? In my view, finance is the single course that could be offered in no other department in the university--it is the one course that is unique to the business school in your education. In this course, we begin where you left off in accounting, by looking at the firm's financial statements to determine its health. We then examine risk, return, and the valuation of assets--a subject that will allow you to make both better business decisions and better personal decisions as you acquire assets of various types and make decisions involving financial variables.

We examine working capital, capital structure (how much debt and equity a firm issues) and dividends. We look at capital markets, and discuss ways a firm can raise money. Heck, we might even discuss how you could buy and sell securities and other assets in this section of the course.

This is a course that will require that you keep up, and that you be actively involved in our discussions. It is a course where working in a group on the material (excepting exams, which in this course are to be done strictly alone) will be of great help to you.

I hope, at the end of the program, you will look back on this course and say, "Of all the courses I took, that was the best. It was the best use of my time, and I learned the most there."

Ethical considerations: Throughout this course, you will find discussions of ethics. There are many ways of looking at ethical issues--if there were not, there would be no need to study ethics, it would be automatic. Each of us needs to consider his or her own ethical standards in business, and there are many frameworks to choose from. The purpose of our discussions is to challenge yours so that it is as strong as it can be.

Global considerations: You will find in our discussion of finance that we in the main focus on US finance and financial markets. However, dealing globally has become increasingly important over time. We will, when appropriate, bring in aspects of finance from other countries, including the way US companies operate their foreign subsidiaries (and visa versa).

Grading and attendance: Please see the last page of this syllabus regarding grading and attendance issues.

Conduct: The Graziadio School of Business and Management has asked me to direct your attention to the academic catalog, regarding conduct expected of students and of employees of the University (search "conduct". The relevant sections are in the "Legal Notices" section of the catalog, although there are other sections of the catalog that deal with what Pepperdine expects in terms of behaviors of members of the Pepperdine community.)

Policy on disabilities: The Graziadio School of Business and Management has asked me to direct your attention to the academic catalog, regarding assistance for students with disabilities (in the catalog, search "disabilities" and you will find significant information).

The text for the course is:

Information and helpful hints: Please prepare the readings and materials listed below each session for that session. Many students have told me that the optional study guide assignments have been useful to them. These assignments will not be collected.

PREPARE, listed below, means that at a minimum you should read the material, think about it and prepare any questions listed. PREPARE does not mean write for turn in, although I may, on occasion, choose to collect your notes. Please feel free to bring up uncovered issues in class.

You will be assumed prepared unless you tell me otherwise. It is very important that you be prepared for each session--important to you and to our learning team. I realize that some of this material will be difficult for some of you. It is the doing and the trying that are important. Coming to class prepared--having done the reading and prepared as best you can--is very important to your learning.

Previous groups have told me that working in groups of three to five in preparing the out of class material was very helpful--in fact, many of those students have told me that they would require such groups, although at the start of class they would have resisted such an assignment. I do not plan to assign such groups, but I strongly urge you to get into a study group. However, if you are not participating in your group, or are the only one participating in your group, you are in the wrong group.

If I were studying for the class, I would do a quick reading first, then do a more detailed reading, and then would prepare the other material. I expect that you may spend approximately eight hours per week outside of class preparing this material. If you are significantly below that estimate, please be sure that you aren't fooling yourself regarding your preparation.

You may be interested in checking out my "Useful Finance and Accounting Websites" data page . As you go through the course, I believe you will find this a good source of information.

Session I--August 30--Introduction to the course; ratio analysis; financial markets


Prepare: Be prepared to discuss Ethical Dilemma: Hocus-Pocus--Look, an increase in sales! (BB, p. 69)

Pick up: Case on ratios for Session II

Download: Handout for your type of calculator for next time

Session II--September 6--Time value; valuing stocks and bonds; cost of capital


Prepare: Case on ratios passed out in last class.

Session III--September 13--Valuing stocks and bonds; cost of capital, capital budgeting


Download: Taco Frio case for next week

Session IV--September 20--Catch up, Taco Frio case

Session V--September 27--First midterm examination

Session VI--October 4--Leverage, dividends and internal financing


Session VII--October 11--Working capital management, managing current assets


Prepare: Be prepared to discuss Ethical Dilemma: Money Back Guarantee, No Questions Asked (BB, p. 623)

Session VIII--October 18--Risk and investing


Session IX--October 25--Forecasting, planning and control; advanced topics


Prepare: Case on forecasting. We did the part of this case at week 2.

Session X--November 1--Stocks and markets


Session XI--November 8--Second midterm examination

In class examination covering sessions VI through X. This examination will be approximately 2-1/2 hours in length.

Note on potential changes to the class in sessions XII and XIII: I reserve the right to change the next two weeks of this course based on what I believe is in the best interests of the students of the class. I may, for example, alter Session XII and have a team presentation (individually graded) as the final examination, which would count as 34 percent of the total points in the class. We will talk more about that after the second midterm examination.

Session XII--November 15--Investments, financial planning and estate planning

In this class we will discuss the various stock and bond investments that you can make. Remember that your purchase decisions are the other half of your firm's sale decisions, so that at the same time you are learning to buy securities, you will be learning to sell them.

In addition, we will be discussing gifts and estates. Please feel free to bring a "relevant other"--a spouse, a parent, a child or a co-worker-to this session if you think they might benefit from its content.

Session XIII--November 22--No class--Enjoy Thanksgiving tomorrow

Session XIII--November 29--Final examination or other final exercise as determined by the professor

How will my grade be computed?

Your grade will be based in the main on your total points on three examinations: