About this course: In this course you will learn how companies decide on how much debt to take, and whether to raise capital from markets or from banks. You will also learn how to measure and manage credit risk and how to deal with financial distress. You will discuss the mechanics of dividends and share repurchases, and how to choose the best way to return cash to investors. You will also learn how to use derivatives and liquidity management to offset specific sources of financial risk, including currency risks. Finally, You will learn how companies finance merger and acquisition decisions, including leveraged buyouts, and how to incorporate large changes in leverage in standard valuation models. Upon successful completion of this course, you will be able to: • Understand how companies make financing, payout and risk management decisions that create value • Measure the effects of leverage on profitability, risk, and valuation • Manage credit risk and financial distress using appropriate financial tools • Understand the links between payout policies and company performance • Use derivatives and liquidity management to offset financial risks • Pick an appropriate financing package for an M&A or leveraged buyout deal This course is part of the iMBA offered by the University of Illinois, a flexible, fully-accredited online MBA at an incredibly competitive price. For more information, please see the Resource page in this course and onlinemba.illinois.edu.
Created by: University of Illinois at Urbana-Champaign
Taught by: Heitor Almeida, Professor of Finance, Stanley C. and Joan J. Golder Chair in Corporate Finance
Department of Finance, College of Business
| Basic Info | Course 6 of 7 in the Financial Management Specialization |
| Language | English, Subtitles: Korean |
| How To Pass | Pass all graded assignments to complete the course. |
| User Ratings |
Complete this course to work toward:
Financial Management Specialization
This course is part of the 7-course Financial Management Specialization from University of Illinois at Urbana-Champaign
Master of Business Administration (iMBA)
This course is part of the fully-online 18 courses plus three capstone projects degree program
Syllabus
WEEK 1
Course Orientation
You will become familiar with the course, your classmates, and our learning environment. The orientation will also help you obtain the technical skills required for the course.
2 videos, 5 readings, 1 practice quiz
- Video: Corporate Finance II Welcome
- Video: Welcome to Corporate Finance II: Financing Investments and Managing Risk
- Reading: Syllabus
- Reading: About the Discussion Forums
- Reading: Glossary
- Reading: Social Media
- Reading: Getting to Know Your Classmates
- Practice Quiz: Orientation Quiz
Module 1: Raising Financing: The Capital Structure Decision
In Module 1, we will discuss the differences between debt and equity financing for corporations. We will then learn how to avoid usual mistakes that people make when analyzing the choice between debt and equity. We will work with financial statements to understand the impact of higher debt on corporate profits, and we will learn how debt and risk are fundamentally related. Finally, we will use our knowledge to understand how companies choose how much debt to have.
12 videos, 2 readings, 2 practice quizzes
- Reading: Module 1 Overview
- Reading: Module 1 Readings
- Video: Objectives and Overview
- Video: Issuing Debt and Equity – The Mechanics
- Video: Should a Company Issue Debt or Equity?
- Video: Two Misconceptions
- Video: Debt Increases Systematic Risk
- Practice Quiz: Practice Quiz 1
- Video: Evidence From the Field: Which Type of Capital Do Firms Prefer?
- Video: The Effect of Leverage On Taxes and Profits
- Video: Leverage and Personal Taxes
- Video: Leverage and the Risk of Financial Distress
- Video: The Trade-off Theory of Capital Structure
- Practice Quiz: Practice Quiz 2
- Video: Analog Outfitters
- Video: 1-11: Module 1 Review
Graded: Module 1 Quiz
WEEK 2
Module 2: Understanding Debt Financing and Payout Policy
In Module 2 we will dig deeper into the mechanics and the institutional details that are important to understand debt financing. We will learn models that allow us to link default probabilities to yields on a company’s debt. We will discuss the roles of credit ratings and credit default swaps for debt markets. We will learn the importance of non-price contractual terms such as debt covenants, collateral and seniority. We will use this knowledge to understand how companies choose between bank debt and bond financing. Finally, we will discuss how payout decisions (dividends and share repurchases) affect firm value and how companies choose their optimal payout policy.
12 videos, 2 readings, 3 practice quizzes
- Reading: Module 2 Overview
- Reading: Module 2 Readings
- Video: Objectives and Overview
- Video: Pricing Debt: Yield to Maturities, and Default Probabilities
- Video: Credit Ratings: Determinants and Implications
- Practice Quiz: Practice Quiz 1
- Video: Credit Default Swaps
- Video: The Many Different Types of Debt
- Video: Bank or Market Financing?
- Practice Quiz: Practice Quiz 2
- Video: Do Dividends and Share Repurchases Affect Firm Value?
- Video: Main Factors Driving Payout Decisions
- Video: Dividends or Repurchases?
- Practice Quiz: Practice Quiz 3
- Video: 2-10: Module 2 Review
- Video: Assignment 1 Overview
- Video: Assignment 1 Discussion
Graded: Module 2 Quiz
Graded: Module 2 Assignment
WEEK 3
Module 3: Risk Management
In Module 3 we will identify good and bad reasons why companies engage in risk management, or hedging. We will learn the mechanics of how to use derivatives such as forwards and futures to eliminate specific risks. We will also discuss how to manage risks that cannot be hedged with derivatives. In particular, we will learn that appropriate liquidity management can work as a substitute for hedging strategies. We will also discuss how and why to hedge currency risk, and how to think about a company’s cost of capital when making cross-border investments.
11 videos, 2 readings, 2 practice quizzes
- Reading: Module 3 Overview
- Reading: Module 3 Readings
- Video: Objectives and Overview
- Video: Good and Bad Reasons to Hedge
- Video: Forward Contract
- Video: Futures Contracts
- Video: Hedge Ratios and Imperfect Hedging
- Practice Quiz: Practice Quiz 1
- Video: Liquidity as a Substitute for Hedging
- Video: Bilateral Contracts
- Video: Operational Hedging
- Video: Currency Risk and the Cost of Capital
- Video: Adjusting the Cost of Capital for International Projects
- Practice Quiz: Practice Quiz 2
- Video: 3-11 Module 3 Review
Graded: Module 3 Quiz
WEEK 4
Module 4: Financial Management of Acquisitions and R&D
In Module 4, we will apply the financial management tools that we developed in this course to M&A decisions and R&D programs. We will learn how to finance an M&A deal, and how companies choose between cash and stock payments to acquire target companies. We will also discuss the financing of LBOs (leveraged buyouts), and learn how to model a leveraged buyout using Excel. We will then discuss the financial management of R&D programs, with an emphasis on risk management. Specifically, we will learn how to think about the financing of R&D in a dynamic framework that considers the need to make uncertain follow up investments.
14 videos, 2 readings, 3 practice quizzes
- Reading: Module 4 Overview
- Reading: Module 4 Readings
- Video: Objectives and Overview
- Video: Means of Payment in M&A
- Video: Capital Structure and Payout Policy in M&A Part I
- Video: Capital Structure and Payout Policy in M&A Part II
- Practice Quiz: Practice Quiz 1
- Video: Financing Private Equity Deals Part I
- Video: Financing Private Equity Deals Part II
- Video: Leveraged Buyout (LBO) Modeling Part I
- Video: Leveraged Buyout (LBO) Modeling Part II
- Practice Quiz: Practice Quiz 2
- Video: Financing R&D Investments
- Video: Risk Management for R&D Projects
- Practice Quiz: Practice Quiz 3
- Video: Nona Inc.
- Video: 4-11: Module 4 Review
- Video: Assignment 2 Overview
- Video: Assignment 2 Discussion
Graded: Module 4 Quiz
Graded: Module 4 Assignment
Course Conclusion
You will find out where to go next after completing this course and be able to share any thoughts you have on this course experience.
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University of Illinois at Urbana-Champaign
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Pricing
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| Access to course materials | Available |
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Ratings and Reviews
Great and in depth. The use of real world examples and data helps the transfer of theory into practice.
Excellent conclusion from what I learned in the the first course, this makes it more interesting of course, but I would recommend to take both courses, Thanks Almeida
Great course !
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TS
Lots of case studies along the way and ways to use the knowledge to do some practical assignments.