Financial Management

This subject has the following teaching availabilities in 2012:

For the purposes of considering requests for Reasonable Adjustments under the Disability Standards for Education (Cwth 2005), and Students Experiencing Academic Disadvantage Policy, academic requirements for this subject are articulated in the Subject Description, Subject Objectives, Generic Skills and Assessment Requirements for this entry.

The University is dedicated to provide support to those with special requirements. Further details on the disability support scheme can be found at the Disability Liaison Unit website: http://www.services.unimelb.edu.au/disability/

This subject is designed to equip students with the tools necessary to enable them to make the core decisions faced by managers and investors. The first part of the subject deals with establishing the environment in which organizations operate, namely the objectives of the suppliers of financial and human capital. The subject then considers the basic tools commonly employed by financial managers and investors including discounted cash flow techniques and financial mathematics. Measures and definitions of alternative forms of risk are considered and the relation between risk and expected reward in capital markets is established. Finally, the subject considers the important decisions faced by firms (investment, financing, dividend policy, hedging and executive compensation) and by investors (the composition of their optimal retirement portfolio).

On successful completion of this subject, students should be able to:

• Analyse the environment in which organizations operate, namely the objectives of suppliers of financial and human capital;
• Apply basic financial mathematical techniques;
• Recognise the fundamentals of capital budgeting; the foundation for the use discounted cash flow techniques and the contribution of alternative methods of project evaluation;
• Explain the benefits of diversification and the main drivers of those benefits;
• Differentiate between alternative forms of risk and understand the link between risk and return in a competitive market;
• Describe the nature of leverage and the constraints borrowers face in its use;
• Evaluate the alternatives available to a firm when deciding how to distribute its profits;
• Analyse hedging decisions and their effect on investor and/or manager utility; and
• Understand the costs and incentive effects of alternate executive compensation packages.

• Two group assignments not exceeding 1500 words each, one assignment due in each half of the semester (20%);
• Mid-semester exam (30%);
• A 2-hour end-of-semester examination (50%)

This subject is not available as a breadth subject.

On successful completion of this subject, students should have improved the following generic skills:

• An in-depth knowledge of capital markets through an interpretation and analysis of the environments in which these markets operate;
• Critical and evaluative thinking in relation to alternate forms of risk;
• Communication skills which will be developed through an engagement with business press reporting;
• Problem solving skills through discussion of decisions in relation to optimal debt levels for firms; optimal investment decision and optimal dividend policy;
• Synthesis of data and other information through discussion of alternatives in financial decision making;
• Evaluation of data and other information through differentiation of forms of risk;
• Interpersonal and decision-making skills and receptiveness to alternative ideas through tutorial and team work/collaborative exercises; and
• Ethical thinking and work practice skills in financial decision making through case studies.