Business Finance 620 Ohio State
Ohio State University's Business Finance 620, often referred to as Finance 620 or its equivalent, is a core course typically offered within the MBA program, and sometimes as an elective for upper-level undergraduate business students. It serves as a foundational building block for more advanced finance coursework and provides a comprehensive overview of key corporate finance principles. The curriculum of Finance 620 generally encompasses several key areas. Students are introduced to the time value of money, a critical concept underlying all financial decision-making. This includes understanding present value, future value, annuities, and perpetuities. These calculations form the basis for valuing assets and liabilities. Capital budgeting is another cornerstone. Students learn to evaluate potential investment projects using various methods like Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period. The course typically emphasizes the importance of discounted cash flow analysis and the nuances of calculating relevant cash flows for investment decisions. Risk and return are also central themes. Finance 620 explores the relationship between risk and expected returns, introducing concepts like the Capital Asset Pricing Model (CAPM) and beta. Students learn how to measure risk and incorporate it into investment analysis. This often involves examining different asset classes and portfolio diversification strategies. The course delves into the cost of capital, which is crucial for determining the minimum rate of return a company needs to earn on its investments to satisfy its investors. Students analyze the components of the cost of capital, including the cost of debt, preferred stock, and equity, and learn how to calculate the weighted average cost of capital (WACC). Working capital management is another significant area of focus. Students explore strategies for efficiently managing a company's current assets and liabilities, including cash, accounts receivable, inventory, and accounts payable. The goal is to optimize liquidity and minimize the cost of short-term financing. Capital structure decisions, which involve determining the optimal mix of debt and equity financing, are also covered. The course examines the trade-offs between debt and equity, considering factors such as financial risk, taxes, and agency costs. Students may learn about theories of capital structure, such as the Modigliani-Miller theorem and its extensions. Throughout the course, there is typically an emphasis on practical application. Students often work on case studies, financial modeling exercises, and group projects that require them to apply the concepts learned in class to real-world scenarios. These exercises help develop their analytical and problem-solving skills, preparing them for careers in finance. Software tools such as Microsoft Excel are often heavily utilized. Students may learn to build financial models, perform sensitivity analysis, and generate various financial reports. Familiarity with these tools is essential for success in many finance-related roles. Ultimately, Business Finance 620 at Ohio State provides a solid foundation in corporate finance, equipping students with the knowledge and skills necessary to make informed financial decisions in various business contexts. It serves as a launching pad for those seeking careers in investment banking, corporate finance, portfolio management, and other areas of the finance industry.