University of Technology Sydney

42016 Strategic Finance

Warning: The information on this page is indicative. The subject outline for a particular session, location and mode of offering is the authoritative source of all information about the subject for that offering. Required texts, recommended texts and references in particular are likely to change. Students will be provided with a subject outline once they enrol in the subject.

Subject handbook information prior to 2022 is available in the Archives.

UTS: Information Technology: Information, Systems and Modelling
Credit points: 6 cp

Subject level:

Postgraduate

Result type: Grade and marks

Description

This subject gives non-financial managers, especially managers with a technical background, a new way of thinking about measuring and influencing value in their organisation. It covers the fundamentals of finance within the context of technology and the way technology is changing the practice of value creation. A core theme of the subject is the integration of leadership, strategy and finance in driving success in modern technology companies.

The subject provides an introduction to the theories and practical requirements of business planning, raising capital, investment decisions and managing growth within technology companies. In addition, the subject introduces students to the principles valuing technology projects, new product launches, acquisitions and ultimately technology companies.

After introducing essential concepts of measuring value through the financial statements, the subject relates these to technology industries, focusing on the way innovation in technology is reflected in financial ratios. The subject also examines the drivers of value for technology businesses and allows students to explore strategies and tactics that maximise value for shareholders. Drivers of value include an understanding of price, volume and margins from an income statement perspective and working capital management from a balance sheet perspective. The subject also challenges students to evaluate the optimal funding mix for technology projects and companies and assess optimal capital structure. This includes a critical analysis of the risk/reward relationship between raising equity or debt for large projects.

Subject learning objectives (SLOs)

Upon successful completion of this subject students should be able to:

1. Assess the financial performance of a technology business and interpret metrics that analyse the health of a business
2. Understand the value drivers of a technology business and devise tactics that influence value
3. Prepare financial forecasts and cash flows
4. Determine the future funding needs of a technology project or business
5. Optimising the cash flows of a business including working capital management
6. Understand the different sources of capital available for funding
7. Determine the optimal capital structure for technology businesses
8. Calculate and interpret the return on investment on projects and investments
9. Value a technology project or business using a range of techniques

Course intended learning outcomes (CILOs)

This subject also contributes specifically to the development of the following Course Intended Learning Outcomes (CILOs):

  • Identify, interpret and analyse stakeholder needs (A.1)
  • Establish priorities and goals (A.2)
  • Apply systems thinking to understand complex system behaviour including interactions between components and with other systems (social, cultural, legislative, environmental, business etc.) (A.5)
  • Identify and apply relevant problem solving methodologies (B.1)
  • Synthesise alternative/innovative solutions, concepts and procedures (B.3)
  • Apply decision-making methodologies to evaluate solutions for efficiency, effectiveness and sustainability (B.4)
  • Demonstrate research skills (B.6)
  • Apply abstraction, mathematics and/or discipline fundamentals to analysis, design and operation (C.1)
  • Develop models using appropriate tools such as computer software, laboratory equipment and other devices (C.2)
  • Evaluate model applicability, accuracy and limitations (C.3)
  • Communicate effectively in ways appropriate to the discipline, audience and purpose (E.1)

Teaching and learning strategies

This subject enables managers from non-financial disciplines to view the world through an executive’s lens by critically analysing a wide range of contemporary cases and integrating the core disciplines of leadership, strategy and finance in decision making. Through contemporary case studies students will develop a detailed ability to analyse situations; use financial tools and techniques to determine the best course of action; and present recommendations Students will develop an ability to critically assess the financial health of technology companies and make strategic decisions that maximise shareholder value. Students will apply their financial analysis skills within their work based context requiring financial analysis, benchmarking within the technology industry, evaluation of strategic options for influencing value and detailed recommendations for enhancing the financial performance of their businesses.

  • Lectures and interactive class processes
  • Case studies
  • Guest speakers from industry
  • Workshop presentations
  • Work-based assessment tasks

Content (topics)

Topics have been designed to develop quickly the participants’ understanding of essential financial tools. These are then considered in the context of technology companies.

1. Measuring and Maximising Value

  • Objective:
    • Assess the financial performance of a technology business and interpret metrics that analyse the health of that business
    • Understand the value drivers of a business and devise tactics that influence value
  • Topics:
    • Financial Statements
    • Financial Ratios
    • Industry Benchmarking

2. Planning Future Financial Performance & Financial Modelling

  • Objectives:
    • Understand lean start-up methodology
    • Prepare financial forecasts
    • Determine the future funding needs of a business
  • Topics:
    • Launching new technology products
    • Lean start-up methodology
    • Business planning
    • Financial modelling and sensitivity Analysis

3. Managing Growth and Working Capital Management

  • Objectives:
    • Determine the future funding needs of a a technology project or business
    • Understand the components of working capital, calculating working capital ratios and influencing working capital needs
  • Topics:
    • Sustainable Growth
    • Working Capital Management

4. Sources of Funding & Optimal Capital Structure

  • Objectives:
    • Understand the different sources of capital available for funding technology ventures
    • Determine the optimal capital structure of a technology business
  • Topics:
    • Risk and Return
    • Sources of Funding
    • Optimal Capital Structure

5. Measuring Project Returns

  • Objectives:
    • Understand the principles of the time value of money, discounted cash flows, net present value and internal rate of return
    • Calculate and interpret the return on investment on technology projects and investments
  • Topics:
    • Measuring return on new technology projects
    • Financial tools for assessing return on investment for investments and projects

6. Business Valuation

  • Objective:
    • Value a technology project or business using different techniques
  • Topics:
    • Discounted Cash Flow Valuation
    • Building a Valuation Model

Assessment

Assessment task 1: Group Assignment 1 - Financial Analysis of ASX Listed Companies

Intent:

Financial Analysis of ASX Listed Companies

Objective(s):

This assessment task addresses the following subject learning objectives (SLOs):

1, 2, 3, 4, 5, 6, 7, 8 and 9

This assessment task contributes to the development of the following Course Intended Learning Outcomes (CILOs):

A.1, A.2, A.5, B.1, B.3, B.4, C.1 and C.2

Type: Project
Groupwork: Group, group assessed
Weight: 20%
Length:

10-minute presentaion and one-page report

Criteria:

Marking Guide

  • Financial calculations and analysis
  • Application of financial concepts
  • Answering the question
  • Quality of the report

Assessment task 2: Group Assignment 2 - Flash Memory Case Study

Intent:

This assignment requires your group to apply all the concepts covered in the course in an integrated, real life case study. Your group will be assisting the executives of Flash Memory in preparing the company's investing and financing plans for the next three years. The intent of the assignment is to allow you to apply the concepts of working capital management, forecasting, cost of capital, investment analysis, valuation and decision making in a technology business.

Objective(s):

This assessment task addresses the following subject learning objectives (SLOs):

3, 4, 5, 6, 7, 8 and 9

This assessment task contributes to the development of the following Course Intended Learning Outcomes (CILOs):

A.1, A.2, B.3, B.4, C.2 and E.1

Type: Case study
Groupwork: Group, group assessed
Weight: 20%
Length:

Maximum 5 page report. An appendix with any financial information may be included.

Criteria:
  • Preparation of Financial Forecasts
  • Calculation of Weighted Average Cost of Capital
  • Net Present Value and New Product Line Analysis
  • Modifying the Financial Forecasts for the New Product Line
  • Selecting the Financial Plan
  • Presentation of the Report

Assessment task 3: Assignment 3 - Practical Application

Intent:

This assignment requires students to apply the strategic finance tools covered in the course to their current business (employer, client or entrepreneurial business).

Objective(s):

This assessment task addresses the following subject learning objectives (SLOs):

1, 2, 3, 4, 5, 6, 7, 8 and 9

This assessment task contributes to the development of the following Course Intended Learning Outcomes (CILOs):

A.1, A.2, B.3, B.4, B.6, C.1, C.3 and E.1

Type: Project
Groupwork: Individual
Weight: 60%
Length:

Maximum 8 page report (with financial calculations appended)

Criteria:
  • Financial statement and ratio analysis
  • Identification of value drivers
  • Analysis of funding and cost of capital
  • Forecasting
  • Valuation
  • Recommendations

Required texts

Higgins R. (2012). Analysis for Financial Management. (10th Edition). McGraw-Hill

Recommended texts

Berk J. & DeMarzo P (2009) Corporate Finance, The Core. (Pearson International Edition).

References

Jensen M. (2001) Value Maximisation, Stakeholder Theory and the Corporate Objective Function. European Financial Management. Vol. 7 No. 3 2001, p 297 – 317

Blank S. (2013). Why the Lean Start-up Changes everything. Harvard Business Review. May 2013.

Kawasaki G. (2004). The Art of the Start. Chapter 4: The Art of Writing a Business Plan and Chapter 5: The Art of Bootstrapping. Portfolio Publishing.

Pitman B (2003) Leading for Value. Harvard Business Review On Point 2003.

Churchill N. & Mullins J. (2001) How fast can your company grow? Harvard Business Review, May 2001

McClure B. (2010). Discounted Cash Flow Analysis. Investopedia Online Resources. www.investopedia.com

Rogers P., Holland T. & Haas D. (2002). Value Acceleration: Lessons from Private-Equity Masters. Harvard Business Review. June 2002.

Rappaport A. (2006). 10 Ways to Create Shareholder Value. Harvard Business Review. September 2006.