CBM Module 700 – Finance
700.1 Finance Strategies
700.1.1 Relate finance strategy to business strategy
700.1.2 Define the finance function in a firm
700.2 Business Failures and Bankruptcies
700.2.1 Understand the types and causes of business failure
700.2.2 Understand the mechanisms of reorganization and liquidation in bankruptcy
700.3 Components of Short-Term Assets
700.3.1 Understand short-term financial management, net working capital, and the related tradeoff between profitability and risk
700.3.2 Describe the cash conversion cycle, its funding requirements, and key strategies for managing it
700.3.3 Discuss inventory management with differing views, common techniques, and international concerns
700.3.4 Explain the credit selection process and the quantitative procedure for evaluating changes in credit standards
700.3.5 Review the procedures for quantitatively considering cash discount changes, other aspects of credit terms, and credit monitoring
700.3.6 Understand the management of receipts and disbursements, including float, speeding-up collections, slowing-down payments, cash concentration, zero-balance accounts, and investing in marketable securities
700.4 Components of Short-Term Financing
700.4.1 Understand how to manage spontaneous liabilities
700.4.2 Understand how to manage unsecured sources of short-term loans
700.4.3 Understand how to manage secured sources of short-term loans
700.5 Components of Long-Term Financing
700.5.1 Understand the key assumptions, the basic concept, and the specific sources of capital associated with the cost of capital
700.5.2 Determine the cost of long-term debt and the cost of preferred stock
700.5.3 Calculate the cost of common stock equity and convert it into the cost of retained earnings and the cost of new issues of common stock
700.5.4 Calculate the weighted average cost of capital (WACC) and discuss alternative weighting schemes
700.5.5 Describe the procedures used to determine break pints and the weighted marginal cost of capital (WMCC) and investment opportunities schedule (IOS)
700.5.6 Discuss leverage, capital structure, breakeven analysis, the operating breakeven point, and the effect of changing costs on it
700.5.7 Understand operating, financial, and total leverage and the relationships among them
700.5.8 Describe the types of capital, external assessment of capital structure, and the capital structure of non-US firms
700.5.9 Explain the optimal capital structure using a graphical view of the firm's cost-of-capital functions and a zero growth valuation model
700.5.10 Discuss the earnings before income taxes (EBIT) and earnings per share (EPS) approaches to capital structure
700.5.11 Review the return and risk of alternative capital structures, their linkage to market value, and other important considerations related to capital structure
700.5.12 Understand cash dividend payment procedures, the tax treatment of dividends, and the role of dividend reinvestment plans
700.5.13 Describe the residual theory of dividends and the key arguments with regard to dividend irrelevance and relevance
700.5.14 Discuss the key factors involved in establishing a dividend policy
700.5.15 Review and evaluate the basic types of dividend policies
700.5.16 Evaluate stock dividends, stock splits, and stock repurchases from accounting, shareholder, and company points of view
700.6 Financial Forecasting, Planning, and Control
700.6.1 Learn how to analyze a firm's cash flow
700.6.2 Understand a firm's financial planning process
700.6.3 Discuss the cash-planning process and the preparation, evaluation, and use of the cash budget
700.6.4 Learn how to prepare and evaluate pro forma income statement and balance sheet
700.7 Capital Valuation Techniques
700.7.1 Understand the fundamentals of interest rates
700.7.2 Understand the features, costs, and types of corporate bonds
700.7.3 Understand the fundamentals of valuation of an asset
700.7.4 Learn how to value bonds
700.7.5 Understand the difference between debt capital and equity capital
700.7.6 Understand common stock and preferred stock, including their rights and features
700.7.7 Understand the common stock valuation techniques
700.8 Capital Budgeting
700.8.1 Understand the key motives for capital expenditure and the steps in the capital budgeting process, including the basic terminology
700.8.2 Discuss relevant cash flows, expansion versus replacement decisions, sunk costs and opportunity costs, and issues in international capital budgeting
700.8.3 Calculate the initial investment associated with a proposed capital expenditure
700.8.4 Find the relevant operating cash inflows associated with a proposed capital expenditure
700.8.5 Determine the terminal cash flow associated with a proposed capital expenditure
700.8.6 Understand the role of capital budgeting techniques in the capital budgeting process
700.8.7 Calculate, interpret, and evaluate payback period
700.8.8 Calculate, interpret, and evaluate the net present value (NPV)
700.8.9 Calculate, interpret, and evaluate internal rate of return (IRR)
700.8.10 Use net present value profiles and conflicting rankings to compare NPV and IRR techniques, including their strengths and weaknesses
700.8.11 Understand the importance of recognizing risk in the analysis of capital budgeting projects
700.8.12 Discuss risk and cash inflows, scenario analysis, and simulation as behavioral approaches for dealing with risk
700.8.13 Review the unique risks that multinational companies face in capital budgeting
700.8.14 Describe the determination and use of risk-adjusted discount rates (RADRs), portfolio effects, and the practical aspects of RADRs
700.8.15 Understand the capital budgeting refinement techniques, including capital rationing
700.9 Financial Institutions and Markets
700.9.1 Define financial institutions and financial markets
700.9.2 Discuss the relationship between financial institutions and financial markets
700.10 Financial Risk Management
700.10.1 Differentiate between hybrid securities and derivatives securities
700.10.2 Review the types of leases, leasing arrangements, the lease-versus-purchase decision, the effects of leasing on future financing, and the advantages and disadvantages of leasing
700.10.3 Describe the types of convertible securities, their general features, and financing with convertibles
700.10.4 Demonstrate the procedures for determining the straight bond value, the conversion (or stock) value, and the market value of a convertible bond
700.10.5 Explain the key characteristics of stock purchase warrants, the implied price of an attached warrant, an the values of warrants
700.10.6 Define options and discuss calls and puts, options markets, options trading, the role of call and put options in fund raising, and hedging foreign-currency exposures with options
700.10.7 Understand the concept of financial engineering to manage risks
700.11 Mergers, Leveraged Buyouts, and Divestitures
700.11.1 Understand the fundamentals of merger, including its types
700.11.2 Understand leveraged buyouts (LBOs) and divestitures
700.11.3 Learn how to analyze and negotiate mergers
700.11.4 Define holding companies, including their advantages and disadvantages
700.12 Operations, Marketing, and Finance
700.12.1 Discuss the interplay among operations, marketing, and finance
700.13 Quantitative Techniques and Finance
700.13.1 Understand the time value of money and its use in finance
700.13.2 Understand the relationship between risk and return as it applies to finance
700.14 Economics and Finance
700.14.1 Relate economics to finance
700.15 Accounting and Finance
700.15.1 Relate accounting to finance
700.16 Quality and Finance
700.16.1 Discuss quality issues in finance
700.17 Law and Finance
700.17.1 Discuss various U.S. antitrust laws
700.17.2 Discuss various U.S. investor protection and securities laws
700.17.3 Discuss various U.S. bankruptcy laws
700.18 Ethics and Finance
700.18.1 Understand the role of business ethics in finance
700.19 International Issues
700.19.1 Understand the major factors that influence the financial operations of multinational companies (MNCs)
700.19.2 Describe the key differences between purely domestic (U.S) and international financial statements in terms of consolidation, translations, and profits
700.19.3 Discuss exchange rate risk and political risk, and explain how MNCs manage them
700.19.4 Learn how to manage long-term investment and financing decisions
700.19.5 Learn how to manage short-term financial decisions
700.19.6 Understand the motives for international mergers and joint ventures
