AVSC 3400 COURSE PREVIEW
Applied Aviation Finance
Examines financial management in the aviation corporate and public sectors and the role of financial markets and institutions. Introduces finance terminology and techniques. Discusses time value of money, fundamentals of security valuation, capital asset pricing model and capital budgeting. Introduces weighted average cost of capital and contrasts debt policy and governance in the public and private aviation sectors.
Define the managerial finance function within an aviation organization.
- Apply basic finance terminology.
- Identify the primary activities of the finance manager.
- Differentiate between the legal forms of business organization.
- Describe the principle-agent relationship between the owners and managers of a corporation and how agency problems are managed through corporate governance.
Explain the role of financial markets and institutions.
- Describe the differences between the capital markets and the money markets.
- Cite the major regulations and regulatory bodies that affect financial institutions and markets.
- Demonstrate how business taxes impact financial decisions.
- Discuss the effects of a national financial crisis
Evaluate financial performance using appropriate benchmarks.
- Describe the users of financial ratios and how they are used.
- List the major categories of financial ratios.
- Explain the importance and relevance of the notes to the financial statements.
Utilize the financial planning process to prepare cash flow projections and pro forma financial statements.
- Demonstrate the effects of tax depreciation procedures on cash flows.
- Distinguish between the firm’s operating, investing, financing and free cash flows.
- Describe the cash planning process and the preparation and use of the cash budget.
- Prepare pro forma financial statements.
Apply time value of money concepts in the evaluation of financial decisions.
- Distinguish between present and future values, single payments and annuities.
- Compute the present value of a future payment.
- Evaluate the present and future values of a series of cash payments.
- Compare interest rates quoted over different time periods.
- Differentiate between effective and nominal interest rates.
Evaluate debt securities using the basic valuation model and an understanding of the term structure of interest rates.
- Describe interest rate fundamentals, the term structure of interest rates and risk premiums.
- Discuss the general features of bonds.
- Explain how a bond’s rating is an assessment of risk.
- Apply the basic valuation model to evaluate a bond’s worth.
Evaluate stock securities using various stock valuation models.
- Differentiate between the features of common stock and preferred stock.
- Describe the process of issuing stock, including venture capital, going public and the role of the investment banker.
- Apply behavioral finance theory to a real life investment scenario.
- Evaluate a stock’s value using an appropriate stock valuation model.
Apply risk and return concepts in evaluating financial investments.
- Recognize the meaning of risk, return and risk preferences.
- Define the role of beta in measuring the relevant risk of a security.
- Explain the Capital Asset Pricing Model (CAPM) and its relationship to the security market line (SML).
- Evaluate the risk of an asset by computing the range, standard deviation and coefficient of variation.
Evaluate a firm’s cost of capital.
- Explain the significance of the marginal cost of capital.
- Determine the cost of long-term debt for an aviation business and explain why the after-tax cost of debt is the relevant cost of debt.
- Calculate the cost of equity for an aviation business.
- Compute the weighted average cost of capital (WACC) for an aviation business.
Analyze investment decisions and capital budgeting solutions using accepted financial analysis techniques.
- List the key elements of the capital budgeting process.
- Calculate and interpret the payback period for a project.
- Compute the NPV and IRR for a project and evaluate the results.
- Distinguish between advantages and disadvantages of NPV and IRR.
Assess a firm’s operating and financial leverage and its relationship to an optimal capital structure.
- Compare and contrast operating and financial leverage.
- Explain the optimal capital structure of a firm.
- Compute the operating and financial leverage of an aviation firm.
- Calculate the break-even point for an aviation firm.
- Discuss the relationship between debt and financial leverage and the ratios used to evaluate a firm’s debt.
Describe and evaluate the factors involved in establishing a dividend payout policy.
- Explain how dividends are paid and how corporations decide how much to pay.
- Apply the residual theory of dividend payments to explain the relevance or irrelevance of dividends.
- Evaluate the use of stock dividends versus cash dividends.
- Describe the tax consequences of stock dividends, cash dividends and share repurchases.
Analyze a firm’s needs for working capital.
- Determine the cash conversion cycle for an aviation business.
- Explain the credit selection process and the quantitative procedures for evaluating changes in credit standards.
- Discuss common inventory management techniques and the ways inventory can be used as short-term collateral.
- Summarize the procedures for evaluating credit terms.
- Explain how a company can use their payables and accruals to influence their working capital
Evaluate a lease-versus-purchase decision for an aviation business.
- Differentiate between operating leases and capital leases.
- Discuss the advantages and disadvantages of leasing.
- Describe the application of lease financing to airline operations.