**CABM Module 700 – Finance**

**700.1 Finance Strategies
**700.1.1 Understand goals of a corporation in terms of profit maximization / maximization of shareholder wealth

700.1.2 Discuss the principles that form the foundations of financial management

**700.2 Basic Financial Statements
**700.2.1 Understand the components of an income statement

700.2.2 Understand the components of a balance sheet

700.2.3 Learn how to measure cash flows, including free cash flows

**700.3 Working-Capital Management
**700.3.1 Learn how to manage current assets and liabilities

700.3.2 Determine the appropriate level of working-capital that is needed

700.3.3 Estimate the cost of short-term credit

700.3.4 Identify the sources of short-term credit

**700.4 Components of Short-Term Assets
**700.4.1 Understand why a company holds cash

700.4.2 Explain the various objectives and decisions in cash management

700.4.3 Learn how to manage cash collection and disbursement procedures and evaluate the expected costs and benefits of cash management services

700.4.4 Determine a prudent composition of marketable-securities portfolio

700.4.5 Learn how to manage accounts receivable amounts, including credit policy

700.4.6 Learn how to manage inventory amounts and levels

**700.5 Cost of Capital
**700.5.1 Define a firm’s cost of capital and calculate the cost of individual components of the capital structure

700.5.2 Calculate a firm’s weighted average cost of capital

700.5.3 Learn how to use a firm’s cost of capital to evaluate new capital investment opportunities

700.5.4 Compute the economic profit earned by a firm

**700.6 Capital Structure Management
**700.6.1 Define the terms business risk, financial risk, financial leverage, and operating leverage and compute the breakeven point in terms of sales dollars and units of output

700.6.2 Calculate a firm’s degree of operating leverage, financial leverage, and combined (total) leverage, including the financing mix

700.6.3 Learn how to use the basic tools of capital structure management

**700.7 Dividend Policy
**700.7.1 Describe the tradeoff between paying dividends and retaining profits and explain the relationship between a dividend policy and the market price of a common stock

700.7.2 Describe the practical decisions related to dividends, alternative dividend policies, and the actual dividend payment procedures

700.7.3 Understand the circumstances leading to declaring stock dividends, stock splits, and stock repurchases

**700.8 Financial Forecasting, Planning, and Control
**700.8.1 Understand the variables in financial forecasting and learn how to use the percent of sales forecast method and calculate a firm’s sustainable rate of growth

700.8.2 Describe the limitations of the percent of sales forecast method and prepare a cash budget for determining a firm’s financing needs

**700.9 Capital Valuation Techniques
**700.9.1 Understand the various types and features of bonds

700.9.2 Define the term “value” and identify the factors that determine “value” and describe the basic process for valuing assets

700.9.3 Learn how to estimate the value of a bond, compute a bondholder’s expected rate of return (yield to maturity), and explain the important relationships that exist in bond valuation

700.9.4 Define preferred stock with its features and learn how to value a preferred stock

700.9.5 Define common stock with its features and learn how to value common stock

700.9.6 Calculate a stock’s expected rate of return from a stockholder’s viewpoint

**700.10 Capital Budgeting
**700.10.1 Learn how to find profitable projects for investment and determine whether a new investment project should be accepted or rejected using the payback period, the net present value, the profitability index, and the internal rate of return method

700.10.2 Define the concept of capital rationing and discuss the problems encountered in ranking investment projects

700.10.3 Understand guidelines for capital budgeting and for measuring cash flows and learn how to calculate a project’s free cash flows

700.10.4 Discuss the various options available in capital budgeting

700.10.5 Learn how to measure and incorporate risk into capital budgeting and learn how to examine a project’s risk through simulation and sensitivity analysis

**700.11 Financial Institutions and Markets
**700.11.1 Understand how a financial manager raises funds either internally or externally and understand the rate-of-return relationships among various classes of financing instruments available in financial markets

700.11.2 Understand the components of the U.S. financial market system

700.11.3 Understand the role of the investment banker and private placements and learn about the flotation costs in raising the long-term capital

700.11.4 Understand the role of the regulations in financial markets

**700.12 Financial Risk Management
**700.12.1 Define compound interest and future value of money

700.12.2 Learn how to calculate the time value of money

700.12.3 Define present value of money

700.12.4 Differentiate between ordinary annuities and annuities due methods

700.12.5 Explain the concept of loan amortization

700.12.6 Calculate the compound interest with non-annual periods

700.12.7 Calculate the present value of an uneven stream of payments and determine the present value of a perpetuity

700.12.8 Define and measure the expected rate of return of an individual investment and the riskiness of an individual investment

700.12.9 Explain how diversifying investments affects the risk and expected rate of return of an asset portfolio

700.12.10 Explain the relationship between an investor’s required rate of return on an investment and its investment risk

**700.13 Mergers and Acquisitions
**700.13.1 Explain motivations behind mergers and acquisitions (M&A) and show how they have changed over time

700.13.2 Explain why M&A is important to strategy

700.13.3 Identify the various types of M&A

700.13.4 Understand how the pricing and premiums of M&A affect the realization of synergies

700.13.5 Discuss the steps in the M&A process

700.13.6 Outline the alternative ways to integrate M&A and explain the implementation process

700.13.7 Discuss the characteristics of M&A in different industry contexts