What you will study
The module consists of the following six units, each of which lasts between two and three weeks:
Unit 1 – Organisational goals and financial decision making
In this introductory unit, you'll be provided with a broad overview of the various types of organisations that feature in today’s economy. You'll appreciate how they differ in terms of their overall purpose and, therefore, in some aspects of their operations. In exploring the financial management environment, you will learn about the role financial managers play in helping organisational strategies succeed. Finally, you'll consider the responsibilities of financial managers and the major decision areas that confront them.
Unit 2 – Organisations and the financial system
In this unit, you'll be introduced to the main sources of finance available to organisations, such as bank finance, crowdfunding and venture capital. You'll also consider the related specific opportunities and constraints in an accessible and contextualized manner. The key features of the ‘financing mix’ available to the various types of organisations will be elucidated, along with the relationships that can be built with capital markets. Finally, you'll discover the different ways in which organisations can allocate the financial resources raised, such as capital expenditure, share repurchase and mergers and acquisitions (M&As).
Unit 3 – Time value of money and cost of capital
In this unit, you'll be introduced to the concepts of risk, time value of money and cost of capital. Although it is impossible to exactly calculate the effects of uncertainty on investment projects, tools for quantifying risk are available. You'll cover the quantitative techniques that are the building blocks of the financial literature on risk and discount rate estimations. The unit will also discuss the Weighted Average Cost of Capital (WACC), which gives the base discount rate that a company should use for investment appraisal.
Unit 4 – Investment appraisal
In this unit, you'll focus on making financial decisions for long term investments using investment appraisal techniques and will build on the concept of time value of money. In particular, you will be introduced to the four most commonly used investment appraisal techniques, namely: Payback, Accounting Rate of Return (ARR), Net Present Value (NPV) and Internal Rate of Return (IRR). The advantages and limitations of each of these methods will be discussed, as well as their relevance to analyse the economic viability of long-term projects. Upon completion of the unit, you will be able to answer questions such as: should the business launch a new project or invest in a new machine? You will also look at some practical examples, and touch on other issues in investment appraisal such as non-financial factors.
Unit 5 – Asset valuation techniques
In this unit, you'll consider the most popular approaches to equity valuation such as net asset value, dividend- and cash flow-related techniques, as well as relative valuation approaches. Understanding the forces that drive the price of equity is of great practical importance, since it allows stock market investors to determine whether a particular company is a good buy. Furthermore, it informs managers on how to best follow strategies that maximise shareholder value. As will be illustrated, the valuation techniques covered here could also be successfully employed in the context of bonds and real estate.
Unit 6 – Risk management
In this unit, you'll be introduced to the most commonly used derivative instruments, their contractual characteristics and payoff structure. When used correctly, these instruments can provide cheap insurance for companies and investors alike. The design of hedging methods, which are intended to mitigate or eliminate risk, will be elucidated. Even if derivatives are an invaluable tool in the domain of risk management, they can be dangerous when used for speculation purposes. This unit will illustrate these dangers and provide examples of massive losses that have been made by some imprudent market participants.
This module will cover the key financial skills that are vital for driving success in organisations. Regardless of the role or function that you may perform, being able to understand the key features of financing and investing processes, as well as assess the value and the risks associated with organisational activities, is crucial to effective financial decision making.