BUU22550 Introduction to Finance
(5 ECTS)
Lecturer:
Dr Martha O'Hagan
E-mail: ohaganm@tcd.ie
Office Hours: TBC
Pre- Requisite: BUU11510
Available to exchange Students
Module Description:
The Finance function is a critical aspect of any organisation. The success or failure of a firm may be influenced significantly by how it manages its finances. It is therefore important for both managers and employees to understand the principals of financial management for firms operating in any industry. This course is designed to provide a comprehensive understanding of financial management. It focuses on analysing and evaluating financial products using various techniques. It covers several topics related to financial management such as debt policy, dividend policy, maximising corporate value and financial risk. Throughout this module, students will become familiar with the basic concepts of corporate finance and financial language used within academic literature and the media.
Learning and Teaching Approach:
This module is structured around a series of lectures, tutorials and readings. Students will be expected to prepare homework in advance of and to contribute to discussions in tutorials.
Learning Outcomes:
Having completed this module, the student should be able to:
- Understand the concept of financial management and its importance to organizations
- Use basic financial mathematics and pricing techniques to value bonds, stocks and other risky assets
- Appraise capital investments through the use of appropriate methods and techniques
- Understand the calculation of and relation between risk and return and the importance of managing this relation in corporate decision-making
- Understand the basic elements of investment, financing, capital structure, management of working capital and dividend decision processes.
Relation to Degree
Understanding finance is an essential element for any business and is an essential module of any degree in business. This module aims to give students a solid knowledge in the core concepts of financial management and valuation. It also introduces some concepts relating to sustainable finance.
Workload
| Content | Indicative Number of Hours |
|---|---|
| Lecturing hours | 22 |
| Preparation for lectures | 8 |
| Individual assignment | 25 |
| Reading of assigned materials and active reflection on lecture and course content and linkage to personal experiences | 50 |
| Final exam preparation | 20 |
| Total | 125 |
Recommended Texts/Key Reading:
The recommended textbook for this module is:
Brealey, R. Myers, S. and Marcus, A. Fundamentals of Corporate Finance, McGraw-Hill.
Any recent edition of this textbook will suffice. Alternatively, the college library contains many other excellent textbooks on Corporate Finance which can be referred to for extra reading. Additional readings will also be assigned throughout the course and will be posted on Blackboard.
Schoenmakre and Schramade. Corporate Finance for Long-Term Value, Springer. Open access (free) and can be downloaded at https://link.springer.com/book/10.1007/978-3-031-35009-2
Student preparation for the Module
Complete an online excel course before the start of term – details to follow.
Course Communication
Please note that all course related email communication must be sent from your official TCD email address. Emails sent from other addresses will not be attended to.
Assessment:
Assessment for this course will be based as follows:
Individual Assignment – 20%
Final exam – 80%
More detail to follow
Students who fail the module will need to submit a supplemental final assessment. The supplemental assessment will count for 100% of the grade.
Attendance at lectures and tutorials is required, any student who attends less than two thirds of lectures and tutorials may be deemed non-satisfactory as per college regulations and may not be allowed to sit the final exam.
https://www.tcd.ie/undergraduate-studies/academic-progress/attendance-course-work.php
Module Schedule
Introducing Core Concepts:
The early lectures will serve as an essential introduction to the core concepts of this module, discussing the main areas of focus in corporate financial management, as well as how sustainable finance should be incorporated into financial management, and introducing the main types of financial calculations used in corporate finance. It is very important that students fully understand the calculations covered in this part of the course, such as present and future values, compounding, annuities and perpetuities, real and nominal interest rates. These methods are used throughout the module.
Financing Costs and Capital Structure:
This section introduces bonds, how they are priced and traded and the main risk factors that affect their price and yield. Credit rating agencies and their impact on the cost of issuing debt are also discussed. We then discuss features of equities and equity markets. We focus on how to analyse investments in terms of risk and return, and introduce the Capital Asset Pricing Model (CAPM). We value shares using two pricing models: the dividend discount model and the CAPM. We calculate the cost of debt and equity of a firm and combine them to calculate the firm’s cost of capital. We discuss the topic of capital structure (the firm’s mix of debt and equity). Various theories on a firm’s capital structure are critiqued and some conclusions drawn on the factors that should influence a firm’s debt-equity ratio.
Capital Budgeting:
This section covers the topic of capital budgeting, and the methods used by firms to evaluate investment projects. We analyse investment projects using methods such as Net Present Value, the Internal Rate of Return, Payback methods and the Profitability Index. We also discuss which cashflows should be included in capital budgeting calculations, and types of project analysis. We also cover working capital management and the issues involved in trying to manage short term cashflows.
Dividend Policy:
Finally we discuss how the firm rewards its investors. We evaluate the different methods that firms use to return value to shareholders, share buybacks and cash dividends. We examine the advantages and disadvantages to the firm and the investors of paying dividends, and we discuss different models of dividend policies.
Biographical Note:
Dr Martha O’Hagan is an Assistant Professor of Finance and the Director of Undergraduate Teaching and Learning in Trinity Business School. She holds a BA in Economics and an MSc in Finance from Trinity College and a PhD in International Finance. Her research is in the area of Behavioural Finance, Entrepreneurship and Sustainable Finance. She has published articles in the British Journal of Management, International Review of Financial Analysis, Small Business Economics, International Journal of Finance and Economics and the International Business Review. Prior to completing her PhD she worked in Investment Banking in London and Dublin, for Bank of America, Credit Suisse First Boston and Bank of Ireland Global Markets. Her area of specialisation was derivatives and financial engineering.
Dr O’Hagan has received multiple teaching awards – in 2019 she was shortlisted for the Provost’s Teaching Excellence Award and won the award in 2020. She was awarded the Trinity Business School Teaching Excellence Award every year between 2018 and 2024, and won a Teaching Hero Award in 2021.