THE COST OF CAPITAL DF2-141-I
This material focuses on determining the rate of return that will satisfy shareholders’ expectations and how to achieve it. It explains how to find the discount rate that represents the cost of the resources that will finance future investments and how to figure out the cost, or the WACC, by weighting the cost of debt and equity as a function of their relative importance in the company’s capital structure. In addition, it covers how to calculate the cost of debt based on the Gordon-Shapiro share pricing model and based on Sharpe’s asset valuation model using real-life examples and historical data. The case stresses that the manager must know how to add value to the investment; shareholders are entrusting the manager with their investment and expecting a higher rate of return than they could get without him. It wraps up by including an FAQ on WACC.Academic Area:Finance
Company Valuation, a graphical approach DF2-221-I-M
This interactive tutorial describes in a very simple manner the four valuation methods: accounting method liquidation method discounting of cash flows and ratios. Using animations and graphs it shows what each of these methods measures focusing on the balance sheet.
The last section of this tutorial is an exercise where students have to apply the four valuation methods for a fictitious company. The objective is for them to see a graphical comparison of the different values obtained under each one of the methods.
This tutorial has been used successfully in undergraduate, graduate (in particular MBA, Masters in Finance and Masters in Management courses) and executive education level finance courses, both in online/blended and face-to-face formats.Academic Area:Finance
Islamic Finance DF2-216-I-M
Islamic finance is a tutorial that shows the main concepts and financial instruments used by Sharia-compliant Financial Institutions. This tutorial focuses on the main operations and contracts in the business environment but also shows through examples the Sukuk or Islamic bonds that continually attract more and more buyers.
The tutorial includes:
- A glossary of Arabic terms commonly used in Islamic finance and Sharia
- Flow diagrams to explain the contracts and flow of funds for the most common Islamic financial instruments
- Flow diagrams to explain the contracts and flow of Sukuk also referred to as Islamic Bonds
- A series of examples based on the application of Islamic financial instruments in different scenarios.Academic Area:Finance
Investing with Talent DF2-123-I-M
This interactive tutorial demonstrates the concept of time value of money and how it is applied in the evaluation of investment opportunities. Two basic tools that rely on this concept the Net Present Value (NPV) and the Internal Rate of Return (IRR) are described and compared to each other and to some more intuitive alternative methods.
These numerical techniques are explained in an easily-understood visual manner through a series of interactive graphs and animations. Questions and numerical exercises throughout allow students to apply these concepts and reinforce the learning objectives.
This interactive tool has been designed to complement the paper based tutorial also included which provides a more in depth discussion of the concepts and their application.Academic Area:Finance
Accounting as a source of Information for financiers DF2-162-I
The general accounts are a useful tool for the company and are intended as a source of information. This information has to follow a set of rules and principles and must be recorded using the principle of double-entry bookkeeping. The finance department’s guiding principle is to "maximize the long-term economic value for shareholders." To generate economic value in the long term, the returns obtained from management of the assets in the normal course of business must exceed the financial cost of the resources funding them.
This technical note explains how concepts of accounting are particularly useful to obtain certain financial information. It talks about general accounting and its guiding principles, the profit and loss account, the balance sheet, accounting statements, liabilities, equity, assets, accounting records, depreciation, provisions, investment and financing decisions and finally cash flows, weighted average cost of capital and discounted cash flow.Academic Area:Financial Accounting | Finance
Optimal Capital Structure DF2-161-I-M
This interactive tutorial explains the concept of the optimal financial mix. Through animations interactive graphs and very simple exercises students will understand and apply this concept.
At the end of the tutorial a practical multimedia case is included where students must find the optimal financial mix for maximizing the value of the investment projects.Academic Area:Finance
Financial Forecasts DF2-105-I-M
This interactive tutorial teaches students the procedures that need to be followed to make financial forecasts. This multimedia resource comprises brief theoretical explanations graphs and an interactive exercise. The exercise will be solved step-by- step as students advance through the program starting with an analysis of the historical data and finishing with the calculation of the funds required.
At the end of this multimedia tool a sensitivity analysis allows students to identify the changes in their forecasts (funds needed or excess funds) that would have occurred had some of the important variables been modified. For example increases or decreases in the cost of goods sold changes in the average collection period of clients changes in the average payment period to suppliers etc.Academic Area:Finance
Company Valuation Through Ratios DF2-145-I-M
This interactive tutorial details the main ratios used in the financial world and their application in company valuations specifically the PER EV/EBITDA PER growth dividend yield and the price to book value.
As each of the ratios are explored their use in making company valuations across different sectors is shown. Students are then asked to make valuations for several companies using this method.
In addition a final exercise has been developed in which students have to make a company valuation using the discounted cash flow method as well as using the average PER and EV/EBITDA of the sector. The different results obtained are then compared with the price quoted on the stock market.Academic Area:Finance
FINANCIAL FORECASTS DF2-105-I
This tutorial gives a step-by-step look at how a company’s future plans are quantified through financial forecasts and explains the purpose and importance of forecasts. It emphasizes that although many people are overwhelmed when it comes to financial forecasts, it is something that must be dealt with and is a tool that financial professionals will never stop using. It explains how students must look at the company’s history and then create the balance sheet and P&L accounts for future years. To do so, it provides past financial results for Ártica and describes what has been happening with its sales, operating costs, expenses, etc. in recent years. It walks students through how to analyze the company’s accounts and then provides steps so that students can create a financial forecast. It demonstrates how you can create an optimistic forecast but also how you must imagine alternatives where things do not go well.Academic Area:Finance