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Financial Management

Course developer

Prior knowledge

Ekon2079, Simple-entry Accounting

Ekon2081, Finance and Credit

Course abstract

The course provides an understanding and knowledge of financial management functions and mechanisms functioning in the company, including financial planning, analysis and evaluation of investment projects. Students acquire business valuation approaches and methods, value of money, understanding of opportunities for financing and crediting the company, methods of settlements as well as financial instruments for increasing the company’s operational efficiency, stability, profitability and risk management.

Learning outcomes and their assessment

1. Knows the functions and mechanisms of financial management in a company as well as the principles and regularities of a company’s financial performance - discussion in class.
2. Knowledge of company valuation approaches and methods and value of money in time - test with calculations, calculations in classes.
3. Knowledge of financial market as a constituent part of the financial system, structure of the financial market, financial instruments and risk management – discussions in class, test.
4. Knowledge and understanding of possibilities for financing and crediting of a company, nature and necessity of financial planning - discussion in class, independent work, test.
5. Knowledge and critical understanding of the indicators reflecting the company financial performance, their regularities and evaluation of investment projects - tests with calculations, calculations in classes, independent work.
6. Knowledge of payment and financing methods - discussion in class, independent work, test.
7. Ability to determine the value of money over time and calculate the value of the company according to different approaches and methods. Students are able to analyse the obtained results, understand the causes and draw conclusions - tests with calculations, calculations in classes.
8. Ability to work independently with financial reports to evaluate the company’s financial performance - practical work, report.
9. Ability to explain and discuss financial management issues - discussions, practical assignments, exam.
10. Ability to demonstrate knowledge on the calculation of a company value, preparation of financial plans, loan repayment schedules and methods of payment - test with calculations, calculations in classes, discussions.
11. Ability to independently analyse and evaluate the financial performance of a company, to determine the factors affecting it, to see the relationships and evaluate investment projects - independent work, test.
12. Ability to plan assignments responsibly - independent work.
13. Ability to engage and take responsibility for individual or group performance and analysis. Students are able to present the results of independent work - group work, report and presentations.
14. Ability to apply the acquired knowledge and skills on the aspects of financial management of the company, determination of the value of the company and choice of financing options as well as the application of payment methods in the company’s activities - independent work, group work, tests, report, presentations, exam.

15. Ability to apply the acquired knowledge and skills in the evaluation of investment projects and analysis of the company’s financial performance - independent work, group work, tests, report, presentations, exam.

Course Content(Calendar)

1. Corporate financial theory and management (lectures - 2 h, practical work - 2 h)
Nature, purpose, functions and tasks of the financial management. Financial mechanism in the company. Provision of financial management information. Methods of financial management, means of regulation, legal provisions, sources of information. Forms and functions of a financial management organisation. Business activities in the financial system. Internal and external information indicators, their characteristics. Integration of financial management into the organisational structure of the company. The basic principles of the company operation. Importance of accounting in obtaining information sources.
2. Value and valuation of a company (lectures - 4 h, practical work - 9 h)
Value of money over time. Calculation of simple and compound interest. Calculation of simple and compound discount. Types of enterprise values. Reasons to determine a company’s value and factors affecting its value. Value of money over time - calculation of interest and discount. Approaches and methods for the determination of a company’s value. Asset-based approach. Market value approach. Earnings value approach - capitalisation and discounting methods. Advantages and disadvantages of company valuation methods. Possibilities to increase the company value.
3. Financial market and financial risk management (lectures - 4 h, practical work - 2 h)
Nature and importance of the financial market. Types and characteristics of the financial market. Functions and principles of the financial market. Importance of the financial market in the company’s operations. Financial instruments. Law on Financial Instruments Market. Classification of financial instruments. Primary financial instruments, their characteristics. Financial derivatives. Participants of the financial market. Nature and classification of risks. Risk identification, risk categories. Risk management stages. Classifications and nature of financial risks. Prevention, control and prioritisation of financial risks.
4. Corporate financing and crediting (lectures - 8 h, practical work - 4 h)
Financing with equity and debt. Internal and external financing. Co-financing, self-financing. Venture capital and its attraction. Development financial instruments. Special types of financing - development financial institution ALTUM, business angels, private investors, business incubators, loan guarantees and other alternative sources of financing. Crowdfunding. Forms, types and functions of loans. Commercial and bank loans (overdraft, credit line, mortgage and other types of bank credits). Leasing, factoring and forfeiting. Crowdfunding (peer-to-peer loans). Credit Unions. Credit availability and factors affecting it. Assessment of customer’s creditworthiness. Loan interest rates (fixed and floating). Credit and interest risk and its management. Credit register, available information. Loan agreement and its terms, documents to be submitted for obtaining credit, collateral.
5. Financial planning (lectures - 3 h, practical work - 3 h)
Nature, content, purpose and meaning of planning. Classification of plans and their application. Planning problems. Purpose, tasks, importance and necessity of financial planning. Procedure for drawing up plans. Financial planning stages. Short, medium and long-term financial planning. Types of budgets. Factors limiting budget preparation. Budget preparation stages. Functional and financial budgets, their compilation. Sales forecasts, production plans, cost budgets, administration costs budget and other types of functional budgets. Financial budgets. Preparation of financial budgets. Cash flow plan. Budgetary control. Analysis of deviations.
6. Investments and evaluation of investment projects (lectures - 4 h, practical work - 3 h)
Nature and types of investments. Investment management. Investment projects and project life cycle. Cost-benefit analysis and methods of investment project evaluation. Payback period method. Discounted cash flow method. Net present value method (NPV). Net present value. Profit index. Internal rate of return method (IRR). Advantages and disadvantages of investment project evaluation methods.
7. Financial strategy of the company, analysis of financial statements and adjustments (lectures - 4 h, practical work - 7 h)
Concept and description of the financial strategy. Capital (own and borrowed), its management and analysis. The process of capital movement. Size of capital and determination for its need, factors influencing the size of capital. Optimal capital structure. Necessary stages for the provision of an optimal capital structure. Financial leverage. Impact of capital structure on profitability ratios. Calculation of capital value. Factors influencing the price of capital. Asset financing models. Liquidity management. Management of accounts payable. Key financial statements (balance sheet, profit or loss statement, cash flow statement) and their components. Application of financial statements for decision making. Assessment of financial position. Relationships of financial indicators and financial ratios and shortcomings in their usage.
8. Types of settlements (lectures - 3 h, practical work - 2 h)
Cash payments. Limitations for cash payments. Non-cash settlement forms, their essence and application. Advantages and disadvantages of payment methods. Delayed payment. Prepayment. Advance payment. Checks. Payments through the bank. Nature and types of the letters of credit. Export letter of credit. Import letter of credit. Essence of documentary collection. Choice of the payment method. Change of payment terms, effect of application of discounts. Bank guarantees (payment guarantee, performance guarantee, advance repayment guarantee etc.)

Requirements for awarding credit points

1. Value of money over time. Calculation of simple and compound interest. The essence of discounting - test with calculations (10%).
2. Characterisation and comparison of the chosen financing means or credit type in the offers of three financial institutions - independent work, group work, discussions (5%).
3. Theoretical aspects of financial management, financial market, financing, crediting and planning - test (10%).
4. Calculation of the company financial performance indicators and cost-benefit analysis, interpretation of results - test with calculations (15%).
5. Study of financial performance and financial management of the selected company, including practical aspects, conclusions and proposals. Report and its presentation - individual work, group work, report and presentation (15%).
6. Activity in classes (5%).

7. Exam - all themes (40%).

Description of the organization and tasks of students’ independent work

Getting ready for practical assignments and tests as well as for the comparative presentation of eligibility criteria for the selected credit type. Study and analysis of financial performance and financial management of the selected company by preparing a report and presenting it.

Criteria for Evaluating Learning Outcomes

All assignments shall be completed. Every assignments is graded. The evaluation of the study course depends on the evaluation of independent and practical assignments (tasks), 10% corresponds to one point on a 10-point assessment scale.

Compulsory reading

1. Krogzeme H. Finanses un nodokļi. Rīga: RTU izdevniecība, 2010. 568 lpp.
2. Rurāne M. Finanšu menedžments. Rīga: RSEBAA, 2005. 384 lpp.
3. Rurāne M. Uzņēmuma finanses. Rīga: Jumava, 2007. 266 lpp.
4. Saksonova S. Uzņēmuma finanšu vadības praktiskās metodes. Rīga: Merkūrijs LAT, 2006. 225 lpp.
5. Bednarskis L., Paupa V., Vaikulis J. Finanšu pārskatu analīze. Rīga: LU, 1994. 96 lpp.
6. Krogzeme H. Komersantu darbības analīze un kontrole. Rīga: RTU izdevniecība, 2013. 348 lpp.
7. Saksonova S. Finanšu informācijas un pārskatu praktiskā izmantošana uzņēmumu finanšu lēmumu pieņemšanā. I.K. “INFO TILTS”. Rīga, 2012. 313 lpp.
8. Zariņa V., Strēle I. Finanšu plānošana uzņēmumā. Rīga: Lietišķās informācijas dienests, 2009. 105 lpp.
9. Войтовский Н. Комплексный экономический анализ предприятия. Минск, 2009. 576 c.
10. Гинзбург А.И. Экономический анализ. Санкт-Петербург: Питер Пресс, 2008. 528 с.
11. Крылов Э.И., Власова В.М., Журавкова И.В. Анализ финансовых результатов, рентабельности и себестоимости продукции. Москва: Финанси и статистика, 2005. 720 с.

Further reading

1. Rurāne M. Finansu pārvaldība. Rīga: Latvijas izglītības fonds, 2002. 281 lpp.
2. Dūdele A., Korsaka T. Finanšu vadības pamati. Rīga: Banku augstskola, 2001. 99 lpp.
3. Praude V. Finanšu instrumenti. I d.: ieguldījumi, darījumi, analīze. Rīga: Burtene, 2009. 446 lpp.
4. Praude V. Finanšu instrumenti. II: ieguldījumi, darījumi, analīze. Rīga: Burtene, 2010. 487 lpp.
5. Rupeika-Apoga R., Zelgalve E. Finanšu tirgus un tā analīzes metodes. Rīga: LU, Akadēmiskais apgāds, 2009. 117 lpp.
6. Šneidere R. Finanšu analīzes metodes uzņēmuma maksātnespējas prognozēšanai. Rīga: Lietišķās informācijas dienests, 2009. 232 lpp.
7. Slavinska I., Zvirgzdiņa R. Finanšu analīze un plānošana. Rīga: SIA „Latvijas Uzņēmējdarbības un menedžmenta akadēmija”, 2007. 259 lpp.
8. Zīriņa V. Finanšu plānošana uzņēmumā. Rīga: Lietišķās informācijas dienests, 2009. 105 lpp.
9. Finanšu vadības rokasgrāmata. V.Jerešenko, J.Pinnis, J.Averina u.c. I daļa. Rīga: Dienas Bizness, 2004.
10. Finanšu vadības rokasgrāmata. V.Jerešenko, J.Pinnis, J.Averina u.c. II daļa. Rīga: Dienas Bizness, 2004.
11. Arnold G. Corporate Financial Management. Third edition, , Parson Education Ltd, 2005. 1160 p.
12. Brigham E., Ehrhardt M. Corporate Finance: A Focused Approach. 2nd ed. Mason, OH: Thomson South-Western, 2006. 793 p.
13. Diderihs H. Uzņēmuma ekonomika. Rīga: Zinātne, 2000. 515 lpp.
14. Jaunzems A. Risku analīze un vadīšana. Ventspils Augstskola. Ventspils: 2009. 361 p.
15. Kālis I. Finanšu vadība. Rīga: LU, grāmatvedības institūts, 2002. 227 lpp.
16. Kurjanovičs V. Biznesa novērtējums: metodika un organizācija. Rīga: Merkūrijs Info, 2010. 189 lpp.
17. Ludboržs A. Apgrozāmā kapitāla vadīšana nelielos uzņēmumos. Rīga: SIA „Lietišķās informācijas dienests”, 2007. 287 lpp.
18. Ovčiņņikova I. Uzņēmējdarbības ekonomika. Rīga: RTU 200. 63 lpp.
19. Saksonova S. Uzņēmuma darbības plānošanas paņēmieni. Rīga: SIA Izglītības soļi, 2004. 105 lpp.
20. Subatnieks K. Komercsabiedrības naudas plūsma: naudas plūsmas absolūto un relatīvo rādītāju izmantošana uzņēmuma finanšu analīzē. Rīga: SIA Drukātava, 2008. 100 lpp.
21. Брег С. Настольная книга финансового директора. Москва: Альпина Бизнес Букс, 2007. 525 с.
22. Савицкая Г.В. Экономический анализ. Минск; Новое знание, 2004. 640 с.
23. Савицкая Т.В. Анализ хозяйственной деятельности предприятия. Минск, 2001. 683 c.
24. Шеремент А.Д. Теория экономического анализа. Москва: Инфра-М, 2005. 365 с.

Periodicals and other sources

1. Bilance: grāmatvedība, likumdošana, finanses: žurnāls par grāmatvedību, likumdošanu un finansēm. Rīga: lietišķās informācijas dienests, 2005. ISSN 1407-5709
2. IFinanses – žurnāls par nodokļiem, grāmatvedību un darba tiesībām un elektroniskais žurnāls/ifinanses.lv. Pieejams: https://ifinanses.lv/
3. Dienas Bizness / Dienas Bizness: nedēļas laikraksts: Latvijas biznesa avīze. Rīga: Diena: Dagens Industri, 2005. ISSN 1407-2041
4. Forbes: žurnāls. Rīga: SK Media, 2010. ISSN 1691-6018.
5. Kapitāls: žurnāls lietišķiem cilvēkiem: krāsains biznesa un ekonomikas žurnāls. Rīga: Lietišķās informācijas dienests, 2005. ISSN 1407-2505.
6. Business Week; nedēļas izdevums. Business Week [tiešsaiste]. Bloomberg L.P. Businessweek ISSN 0007-7135. Pieejams: https://www.bloomberg.com/businessweek.
7. Financial Times: laikraksts [tiešsaiste]. England based finance newspaper. London: The Financial Times Ltd. Pieejams: http://www.ft.com/home/europe.

Notes

Field professional specialisation course (Part B3) for the professional bachelor study programme “Entrepreneurship and Business Management” of the Faculty of Economics and Social Development.