University of Sussex

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University of Sussex

• Finance Course
• Corporate Finance Principles and Practice

The Finance Function
Heather Stone FCCA
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Introducing the tutor

• Heather Stone
• ACCA 1987
• FCCA 1993
• Teaching ACCA/AAT since 1999
• Teaching at Northbrook College
• Third year at University of Sussex

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The Course

• Financial Strategic Planning
• Long term, planning of financial requirements of
  large organisations
• Interpreting the statutory accounts
• Managing the working capital of the organisation
• Tools for investment decisions

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Further syllabus

• Sources of finance debt and equity
• Deciding on the level of dividend
• Portfolio theory investing on eth stock
  exchange
• Mergers and takeovers of businesses

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Assessing the course

• Examination combined with marketing exam
• Revision session after Easter
• Coursework group and individual reports
• Give this out during today's seminar
• Seminar used to practice lecture theory

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Purpose of the Course

• Companies will have many large projects all
  competing for available cash
• Selection will be for best project that meets
  corporate goals and aims
• Need to understand how companies determine the
  best project

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The Role of the Finance Manager

• Control of finance
• Income into company
• Expenses paid out
• Investment decisions and planning
• Dividend decisions
• To keep shareholders happy

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Corporate Objectives

• Maximise shareholder wealth
• Maximise profits
• Maximise sales
• Maximise market share
• Survival
• Social responsibility

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Agency Theory

• Managers should make decisions in line with
  corporate objectives
• Managers are employees with personal goals
• Maximise company size
• Increase personal power
• Job security
• Personal pay and rewards
• Social objectives and pet projects

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Who is this?
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Corporate Governance

• Collapse of big companies
• Polly Peck (1990), BCCI (1991), Maxwell (1991),
  Enron (2003)
• Cadbury Report (1992)
• Voluntary Code of Best Practice
• Greenbury Report (1995)
• Research (1996)
• Higg report (2003)

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Capital Markets

• Sources of business finance
• Internal
• Retained earnings
• WC management
• External
• Equity
• Debt
• Key Concepts
• Risk versus return
• Time value of money

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Capital Markets

• Primary Markets
• Source of finance for a company
• Secondary Markets
• Market place for shareholders to trade the shares
  after initial issue

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Capital Market Places

• London Stock Exchange (LSE)
• Alternative Investment Market (AIM)
• Venture Capitalists
• Banks, Building Societies, Finance Houses for
  smaller amounts

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Market Efficiency

• Perfect Market
• Weak Form Efficiency
• Semi-strong form efficiency
• Strong form efficiency
• Implications to prediction of share prices