Welcome to FIL 240: Business Finance
Instructor: Joseph W. Trefzger
Note on textbook for Spring 2024: Our own outlines for all topics — see below — will provide the basis for most of our in-class discussion. If you like working with a textbook, any good and reasonably recent introductory finance text should be acceptable for helping you get the “big picture” background material, or to provide more information on topics in which you are particularly interested, which is what you would primarily use a textbook for. If you do not have such a book on hand, the one I suggest getting is Financial Management: Principles and Practice, 9th Edition (2022), by T. J. Gallagher (or the 8th Edition dated 2019 is certainly fine if you have it already). It is available as a $39.95 download from Textbook Media Company (www.textbookmedia.com); the ISBN is 978-1-954156-10-4. The publisher’s web site also offers support materials for use with the book, but because we have our own outlines and problem sets with detailed solutions there is no particular reason for you to spend extra on those items.
Earlier editions of this text (Textbook Media published the 4th — 6th editions under its Freeload Press label) also would be likely to serve our needs adequately, since basic financial concepts tend not to change in revolutionary ways over a few years’ time. Since you do not have to bring your book to class each day you can even share a hard-copy book with a friend, as long as you can get reasonable access to it for reading what you want to read in connection with the often briefer outline coverage we go over together in class. Saving money in obtaining desired textbook support makes good financial sense.
Class meets face-to-face in Spring 2024 semester on Monday and Wednesday, from 3:35 to 4:50 PM in 133 State Farm Hall of Business.
FINAL EXAM: Tuesday, May 7, 12:10 – 2:10 PM in our regular classroom
Note that ISU Career Center has some great videos on job interviewing and other career search topics.
Unit One Material: Financial Statements and Basic Time Value of Money
Topic 1: Introduction (Text reading Ch. 1)
Topic 1 is a good general introduction to get us thinking like finance people, but there is no directly testable material in this coverage — so no need to take notes or work problems.
Topic 2: Understanding Financial Statements (Text reading Ch. 4)
See especially 3, 5, 6, 8 – 13, 15.
Topic 3: Analyzing Financial Statements (Text reading Ch. 5)
See especially 1 – 5, 7 – 9, 14, 17, 20, 21, 25, 26, 29.
Topic 4: Time Value of Money (Text reading Ch. 2 pp. 39 – 42; otherwise focus on Instructor’s Outline rather than text material)
The long Appendix is for those who like extra detail; it is not essential to our coverage.
These largely follow the order of our coverage, and they progress to some extent from easier to more difficult. For Unit 1 you will submit hand-written solutions to all of problems 1 – 14. For Unit 2 you will submit hand-written solutions to all of problems 15 to 18 (17 would not make for a good test question, but work it carefully since we are having you turn in hand-worked solutions for credit), parts a and d of 19, and parts a & b of 20 and 21. Work them carefully, showing all key computational steps asked for in the text of the problems; points are taken off if submissions are incorrect or incomplete.
These follow the same order as Comprehensive Set A.
These are in random order, more like exam conditions, and the solutions have less detailed explanations. Problems 1, 2, 3, 4, 7, 8, 9 [first part only], 10, 11, 12, 14 [first part only], 15, 16, 19, 21, and 23 relate to the first part of the outline material up to “Special Annuity Situations.” Problems 5, 9 [later parts with non-annual cash flows], 13, 14 [later parts with non-annual cash flows], 20, and 22 would be of special importance for the subsequent coverage.
These are primarily for reference, though they may be of interest to those who want to dig more deeply into the computations.
For those interested; financial calculator use is NOT required — it is not really even recommended at this early stage of your finance studies. Learn the main roads, and then shortcuts like the calculator function keys should come easily.
Spreadsheet Assignment 1
Unit Two Material: Capital Budgeting
Topic 5: Cost of Capital (Text reading Ch. 9)
See especially 4 – 14; then problems 15 – 23 provide extra practice with similar concepts)
Topic 6: Capital Budgeting Techniques (Text reading Ch. 10)
See especially 1 – 6 and 12 [5 and 6 are hugely important], and also look briefly at 9 and 10; 18 – 21 are very similar to some of the earlier problems for those who want extra practice.
Topic 7: Cash Flow Analysis (Text reading Ch. 11)
(We will skip Topic 7 this semester)
Instructor’s Outline (focus on the numerical example in the outline rather than working Topic 7 problems)
Problems (see especially 1 – 3, 10 – 15, 17)
Problems & Detailed Solutions
Spreadsheet Assignment 2
Unit Three Material: Capital Markets & Short-Term Financing
Topic 8: Capital Structure (Text reading Ch. 13)
See especially 1 & 2, and similar 5 & 6 for extra practice.
Topic 9: Capital Markets (Text reading Ch. 2 pp. 31 – 39; no problems to work)
Topic 10: Bonds (Text reading Ch. 2 pp. 43 – 45; Ch. 12 pp. 327 – 332; Ch. 14 pp. 389 – 401)
Material starting on page 24 is optional.
See especially 1 – 4, 12 – 15, 22, and 25. Problem 5 is similar to important problem 4 for extra practice; and problems 8, 27, and 28 are similar to highly important problem 3 for extra practice.
Topic 11: Risk and Return (Text reading Ch. 7)
Topic 12: Dividends and Dividend Policy (Text reading Ch. 16)
Topic 13: Preferred and Common Stock (Text reading Ch. 12 pp. 333 – 337; Ch. 14 pp. 401 – 404; Ch. 15)
See especially 2, 8 – 13 [each has an alternative set of numbers within it for extra practice], also 15; then problem 23 provides fresh practice numbers for the types of computations in important problems 8, 9, 10, & 13; and problems 7 and 14 may provide added insights on the computations in a problem like 13.
Topic 14: Short-Term Finance/Working Capital (Text reading Skim Ch. 17 – 20; see especially pp. 530 – 532)
For Topic 14 focus on the “Cost of Trade Credit” section on pages 9 to 13 of the outline. There are several numerical examples in that section to use as practice problems, and problem 3 in the problem set is also good.
See especially 1 – 7.
Spreadsheet Assignment 3
Please note that you are computing bond value based on 3 different yield environments, and 4 different remaining periods until maturity for each.