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blockbook - Financial Management and Policy (3020B)...

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Financial Management and Policy (3020B) Blockbook
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Introduction Up to the beginning of the 80’s, the field of financial management seemed to be governed by a limited number of principles corresponding to a reasonable level of complexity. However, in the last two decades, there has been a growing need for a larger and deeper understanding of financial decisions. The dramatic increase in interest rates fluctuations first caused an unprecedented variability in the firms’ cost of capital, making it central in the analysis of investment and capital structure decisions. Cash flows risk was raised at the same time due to the fast rate of technological change and an increased internationalization coupled to a major rise in exchange rate volatility. The need for better performing risk management techniques mostly explains the blossoming of new financial instruments such as options, futures, swaps, etc., as well as the development of hybrid corporate securities combined with traditional debt and equity. The enormous wave of leveraged buyouts in the mid-eighties and the subsequent increase in bankruptcies suggested to researchers and practitioners to reassess the role of debt and dividends and to question whether the objective of maximizing firm value was really widespread. These concerns about a better understanding of financial management may characterize the tendency of the 1990s. Competition became fiercer, and financial weaknesses were easier to detect. This tendency worsened when the confidence crisis lead by the Enron, Worldcom and Vivendi cases arose. Consequently, managers have an increasingly strong incentive to optimize financial decisions, including the design of the best capital structure and the selection of value- creating investment opportunities, and to provide exact and transparent information to the market, whose volatility makes any forecast very hard to sustain. In particular, the role of cash flows and treasury has become crucial in long term as well as short-term financial management.
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The main goal of this course is to provide students with a thorough understanding of major topical areas in financial management, including an overview of the most recent developments. Financial Management and Policy together with Investment Analysis and Portfolio Management, International Investments and Options and Futures form the core courses of the Major Finance and they should be considered as complementary to each other. Sometimes one or more of them are prerequisite for following other finance courses. Objectives and organization The starting point of the block refers to the general objective of corporate financial management: value maximization. The course gradually deepens and refines this main principle by bringing building blocks in different disciplines where strategic decisions may have financial implications. Consequently, several important topics in financial management will be studied during
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This note was uploaded on 11/16/2009 for the course F 3033 taught by Professor Hh during the Spring '09 term at Maastricht.

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blockbook - Financial Management and Policy (3020B)...

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