Corporate Finance and Financial Markets

Wedi cwblhau'r modiwl dylai'r myfyrwyr fedru:

1. Describe, explain and illustrate the structure, characteristics, attributes, purposes and operation of financial markets and a variety of financial market instruments.
2. Explain and analyse the operational risks faced by banks, including sustainability risks and the management of these risks and evaluate the rationale for existence of financial institutions and the need for financial intermediation.
3. Describe and explain and illustrate the issues of capital structure, dividend policy, leasing versus purchase policy, working capital management, accounting-based valuation and financial distress prediction (and associated matters).
4. Describe, derive, interpret and apply models which have been proposed to illuminate these issues.
5. Relate key financial issues one to another, to associated theory and to the preferences and expectations of key stakeholders.
6. Appraise corporate responsibility and sustainability issues.

This module aims to provide students with a thorough treatment of financial markets and institutions and the key financial decisions which are faced by the directors and managers of firms, which include: (i) capital structure; (ii) dividend policy; (iii) leasing (versus borrowing and purchasing) policy; and (iv) working capital management. Sustainability and the interests of all stakeholder groups are key considerations. The module examines the context in which decisions on these issues are made, and analyses relevant controversies and debates.

Introduction
This introduction will consider the structure of firms, their possible objectives and sustainability issues, financing decisions and implications of the Efficient Market Hypothesis for the corporate finance manager. The following topics will be covered:

• Firm structure and their objectives
• Corporate Responsibility and Sustainability issues
• Sources of Finance
• Debt versus equity Financing
• Signalling and agency theory
• The Efficient Market Hypothesis
• Introduction to the different types of markets i.e. continuous/call/money/capital
• Current issues within the global financial markets

Financial markets
• Financial instruments and innovation
• Market microstructure
• Principles of banking
• Financial Intermediation
• Risk and Regulation in Banking, including sustainability risks

Taxation
• Classification of tax systems
• Basis of assessment and advance corporation tax (and its abolition)
• Basis of deduction
• Revenue and Capital Expenditure
• Relief for Capital Expenditure: Capital Allowances
• Trading Losses
• Transfer pricing

Cost of capital and capital structure
• Cost of Capital (Ordinary shares, retained earnings, preference shares, debt, Weighted Average Cost of Capital)
• Gearing and Debt/equity ratio
• Theories of Capital Structure: Traditional and Modernist views
• Modigliani and Miller derivations and arbitrage examples
• Market imperfections: Corporate and personal taxes; risky debt; bankruptcy costs; signalling and agency theories;
• Empirical evidence;
• Investment appraisal: adjusted present value (APV)
• ​Financing choice and Sustainability

Equity finance and dividend policy
• Methods of issuing equity
• Signalling theory, agency theory and clientele theory
• Dividend relevance versus irrelevance
• Dividend policies and alternative distribution channels.

Leasing
• Finance Lease/ Operating Lease
• Financial accounting and tax accounting treatment
• Reasons for leasing, and lease evaluation

Working Capital Management
• Reasons for investing in WCM
• Objectives of WCM and policies, sustainability issues
• Cash conversion cycle and WCM requirement
• Stock management, cash management, debtor management, creditor management
• overtrading and the economic order quantity model Reasons for investing in WCM
• Objectives of WCM and policies, sustainability issues
• Cash conversion cycle and WCM requirement
• Stock management, cash management, debtor management, creditor management
• overtrading and the economic order quantity model

Accounting-based valuation and distress prediction
• Accounting-based valuation models
• Financial distress prediction models
Select and calculate appropriate financial and non-financial performance measures which effectively encourage the business as a whole to meet its objectives including those for sustainability;

Mae'r modiwl hwn yn cydymffurfio a FfCChC Lefel 5