Finance 107: A Concise Overview

Finance 107: Core Concepts

Finance 107 delves deeper into the multifaceted world of financial decision-making, building upon foundational principles. While Finance 101 might cover basic concepts, this course explores more nuanced topics applicable to both individuals and corporations.

Investment Management: Beyond the Basics

Building on portfolio diversification, Finance 107 examines advanced investment strategies. This includes analyzing different asset classes beyond stocks and bonds, such as real estate, commodities, and alternative investments like hedge funds and private equity. Modern Portfolio Theory (MPT) is scrutinized, along with its limitations, leading to discussions on behavioral finance, which acknowledges psychological biases impacting investment decisions. Students learn to evaluate investment performance using metrics like Sharpe ratio and Treynor ratio, understanding their strengths and weaknesses in different market conditions.

Corporate Finance: Strategic Decision Making

This area focuses on how corporations make strategic financial decisions to maximize shareholder value. Capital budgeting techniques, such as discounted cash flow (DCF) analysis, are refined, incorporating risk assessment and sensitivity analysis. Capital structure decisions, involving the optimal mix of debt and equity financing, are explored in depth, considering factors like tax advantages, financial distress costs, and agency costs. Dividend policy, its impact on stock price, and alternative strategies like share buybacks are analyzed. Mergers and acquisitions (M&A), their valuation, structuring, and potential synergies, are a significant focus. International finance concepts, including exchange rate risk and cross-border investment decisions, are introduced.

Risk Management: Identifying and Mitigating Threats

Finance 107 dedicates significant time to understanding and managing financial risk. This includes market risk (interest rate and currency fluctuations), credit risk (default risk), and operational risk. Derivatives, such as futures, options, and swaps, are analyzed as tools for hedging and speculation. Value at Risk (VaR) is explored as a method for quantifying potential losses. The course emphasizes the importance of enterprise risk management (ERM), a holistic approach to identifying and mitigating risks across the entire organization.

Financial Modeling: Practical Applications

Hands-on experience with financial modeling is crucial. Students learn to build sophisticated financial models using spreadsheet software to forecast financial performance, value companies, and analyze investment opportunities. Sensitivity analysis and scenario planning are incorporated to assess the impact of different assumptions. The models are designed to be dynamic and adaptable, allowing for informed decision-making based on changing market conditions.

Ethics and Regulation: Navigating the Financial Landscape

Ethical considerations and regulatory frameworks are integral to sound financial practice. The course explores ethical dilemmas commonly encountered in the financial industry and the importance of maintaining integrity and transparency. Key regulations, such as the Sarbanes-Oxley Act and Dodd-Frank Act, are discussed in the context of corporate governance and financial stability.

In conclusion, Finance 107 provides a comprehensive exploration of advanced financial concepts, equipping students with the analytical skills and ethical awareness necessary for success in various financial careers.