CABM Module 700 Syllabus




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

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