Introduction to some basic characteristics of financial markets. The time value of money, calculations of fair value for bonds and stocks, criteria for financing a business, risk-return trade-offs, regulatory frameworks and ethical considerations are included.
This paper introduces students to business finance with a primary focus on the principles of financial valuation. We first discuss the concept of time value of money together with looking at how we can apply these valuation techniques to making personal investment decisions. Since decision making with investments virtually always involves risk (uncertainty), we will then introduce the concept of risk and the relation between risk and return. This is followed by a discussion of the cost of financing and how that, as integrated with cash flows, will impact on the valuation outcome and decision making at a corporate level. We close the paper looking at the relevance of capital structure and dividend policy in corporate performance.
| Paper title | Financial Decision Making |
|---|---|
| Paper code | BSNS114 |
| Subject | Business Studies |
| EFTS | 0.15 |
| Points | 18 points |
| Teaching period(s) | Semester 1
(On campus)
Semester 2 (On campus) |
| Domestic Tuition Fees (NZD) | $912.00 |
| International Tuition Fees | Tuition Fees for international students are elsewhere on this website. |
- Restriction
- BSNS 108, PTWY 112
- Schedule C
- Commerce
- Notes
- This is a required paper for BCom from 2017 (to be taken in place of BSNS108 by students completing under earlier regulations).
- Eligibility
Prior knowledge in secondary school-level economics, algebra, statistics and accounting would be beneficial but is not compulsory.
- Contact
Semester One: beam.aschakulporn@otago.ac.nz
Semester Two: sebastian.gehricke@otago.ac.nz
- More information link
- View more information on the Otago Business School's website
- Teaching staff
Semester One: beam.aschakulporn@otago.ac.nz
Semester Two: sebastian.gehricke@otago.ac.nz
- Paper Structure
- Quiz 1, Quiz 2, Quiz 3 and Quiz 4 - 2.5% each
- Midterm Exam - 35%
- Final Exam - 55%
- Teaching Arrangements
3 hours of lectures and a 50-minute tutorial per week.
- Textbooks
Required:
Parrino, Kidwell, Yong, Dempsey, Morkel-Kingsbury, Ekanayake, James, Murray Business Finance, 1 st edition. Available at the library.
Recommended:
Timothy Crack. How to ace your business finance class. Available at the library.
- Course outline
- Graduate Attributes Emphasised
- Critical thinking, Self-motivation.
View more information about Otago's graduate attributes. - Learning Outcomes
Upon successful completion of this paper, you should be able:
- To be financially literate.
- To understand the basic characteristics of companies and capital markets.
- To understand time value of money and how it affects financial decisions at the personal and organisational level.
- To understand bonds and stocks, including the calculation of their fair value.
- To understand concepts and calculation of the simple models for free cash flows for a business project.
- To critically analyse business investment decisions.
- To understand the trade-off between risk and return for investors.
- To understand the factors affecting a company's decision to borrow from debtholders versus raising money from shareholders.
