The Krannert full time MBA finance specialization or option area prepares students for a career in corporate finance or investment management, either of which requires an understanding of the role of financial markets in a global economy. Students who pursue a corporate finance career must be able to adopt the perspective of a financial manager who makes financing and investment decisions for the company. The investment management career path requires an understanding of the perspective of an investment or portfolio manager who makes investment and asset allocation decisions in modern interactive financial markets. These perspectives are complementary: in essence the two career tracks involve looking at the same questions from opposite sides of the market. Just as a financial manager should understand the perspective of an investment manager, a portfolio manager should understand the perspective of a corporate financial manager. The Finance specialization courses listed below provide students with the training to accomplish rudimentary financial analysis such as financial forecasting, budgeting, and the analysis of capital investment projects; higher level financial decisions, such as capital structure decisions, dividend policy decisions, mergers and acquisitions decisions, and risk management; and investments functions such as the analysis of individual securities and the management of portfolios. Many students combine specializations in Finance and Operations Management or Strategic Management. However, the Finance courses are taught at a level that is accessible to students from all disciplines and specialization areas.
In recent years, Intel, Procter & Gamble, Air Products & Chemicals, US Airways, Dell, and Samsung Electronics have been some of our biggest recruiters for Krannert students with finance specializations.
Typical Initial Job Titles
Financial Analyst, Senior Financial Analyst, Finance Associate, Finance Manager
Finance students typically have stronger quantitative skills than the average MBA student and have some interest in economics.
Finance Specialization Courses
Ten elective credit hours (five classes) are required beyond the core finance course. Students may take any five of the following financial specialization courses to fulfill the requirements for a finance specialization.
The courses are organized by the typical pattern of the class schedule.
First Year – Module 2
MGMT 61000 Financial Management I
Analysis of short-term working capital needs. Cash budgeting procedures, pro forma statements, major types of short-term loan arrangements, and short-term asset management.
First Year – Module 4
MGMT 61100 Financial Managment II
MGMT 61400 Portfolio Management I
The objective of this course is to provide students with a sound foundation for the main concepts in investment management and portfolio theory. The major topics covered will include: trading mechanics, optimal portfolio selection and asset allocation, the theory of asset pricing models, and performance evaluation. The main emphasis of the course is on common stocks, especially portfolios. The course does not cover individual security selection and valuation. This course is fairly quantitative and relies on the economic theory and analytical tools developed throughout the course. The materials covered in the class have direct real world applications. We will spend a great deal of time discussing empirical evidence. As this is an advanced class, tenets of investment theory are analyzed from a very critical standpoint. Unfortunately, this will often times lead to answers such as “it depends”, “no one knows,” and “we need more data.” Given the empirical nature of the course, it is crucial for the students to follow financial press regularly.
Second Year – Module 1
MGMT 64100 Options and Futures
Rigorous and applied coverage of the pricing and hedging of options and futures contracts with applications. This course provides an introduction to derivative securities. Although the subject is inherently quantitative, the class will emphasize the intuition underlying the pricing of derivatives, rather than technical details and the state-of-the-art techniques. To develop the intuition, a significant portion of the class will cover binomial pricing techniques. This will allow coverage of the Black-Scholes model to focus on the economics, rather than the mathematics. Upon completion of the class, a student should understand the idea of arbitrage pricing, be able to use the binomial and Black-Scholes models for pricing and hedging, and understand the role of derivative securities in the context of other applications (e.g., risk management, real options, and executive compensation).
MGMT 64400 Venture Capital and Investment Banking
This course examines the process of corporate value creation through financial policy choices. The sequence of topics roughly parallels the life cycle of a typical corporation and include the financing of entrepreneurial ventures, the investment banking and capital acquisition process employed for public securities issues, the use of hybrid securities such as convertible debt and PIPEs, project financing, and debt/equity restructurings.
Second Year – Module 2
MGMT 64200 Portfolio Management II
MGMT 64500 Mergers, Acquisition, and Corp Control
This course explores mergers, acquisitions, and other corporate control transactions using readings, case study analysis, and project work. The focus is on the mechanics of the transactions themselves, the valuation of the firms involved, the role of the various parties involved, and the causes and consequences of these activities. Because mergers and acquisitions represent significant changes that involve the entire enterprise the course pulls together material covered in previous finance courses and links financial decisions with the overall strategy of the firm.
Second Year – Module 3
MGMT 61500 Mergers, Acquisition, and Corp Control
This course uses text readings, problems, and case analysis to explore financial decision-making in an international framework from the perspective of the managers of a multinational corporation. Investing across national boundaries presents unique opportunities and unique risks; thus, domestic financial theory must be extended to incorporate these additional factors. Subjects covered include foreign exchange, eurocurrencies and global securities markets, the measurement and management of currency risk, the financial analysis of foreign direct investment, and multinational financial structure.
MGMT 64300 Financial Instruments and Strategy
The course will use text readings, problems, and case analyses with two objectives. First, it will broadly indentify financial risks impacting the firm (principally foreign exchange and interest rates but touching commodities). It will review how firms assess these risks looking at integrated risk management, Value at Risk (VaR), etc. and discuss the financial tools (i.e., derivatives) available to manage that risk. There is no particular order necessary to take certain finance electives but the intent is for the first portion of the course to pull together the International Financial Management class, the Fixed Income class, and Liability Funding which is covered in this course. Second, MGMT 643 will address liability funding (bonds, commercial paper, bank lines of credit, etc.), what drives the cost of those instruments, liquidity, etc. To understand the cost of corporate debt, it will briefly touch upon the debt versus equity financing decision, the impact of credit ratings, and potential investors other investment alternatives (U.S. Treasuries, Mortgage Backed Securities, Municipal Bonds, etc.)
Second Year – Module 4
MGMT 51100 Fixed Income Securities (also listed as MGMT 69100U)
This class explores the analytical concepts required to price and manage the risks inherent in fixed income securities, with an emphasis on bonds, swaps, and Eurodollar futures contracts. In addition, we will discuss models of credit risk and applications of the methods developed in class for evaluating the risk in complex structured swaps and risky sovereign debt. Throughout, the emphasis in the class will be on practical applications of the analytical concepts to real data and securities. Additionally, there is a very strong focus throughout on risk management techniques.
From a broad perspective, understanding the risks inherent in fixed income securities is akin to understanding the risks inherent in managing the financial position of nearly any type of company. For example, banks and insurance companies must continually focus on managing their interest rate risk, prepayment risk, and credit risk. Large international corporations face exchange rate risk, as well as credit risk. This course focuses on these types of risk through practical applications such as duration and convexity hedging, hedging through the use of futures contracts, Value-at-Risk applications, and interest rate swaps. An understanding of these concepts is essential to a career in finance.
Using real data, we will focus on designing and modeling hedging techniques that are used by corporations and institutions facing the risks noted above: credit risk, interest rate risk, currency risk. I will supplement the text with a number of outside readings that illustrate and apply the concepts used in class. The modeling is excel-based, and we will work through a number of modeling techniques during class time. One of the goals of the course is to gain comfort in modeling complex financial transactions, and gaining a strong understanding of valuation techniques that may be applied to a number of financial instruments, not limited only to fixed income securities.
MGMT 59000 Student Managed Investment Fund
This course is intended as credit for students involved with the Krannert student managed investment fund (SMIF). Students that have been active members of SMIF may register for this class in the last module of their second year.
Other Related Courses
The following additional courses are potentially useful to students who will pursue finance careers. However, these courses do not count towards the 10 elective credit hours required for the finance specialization.
MGMT 60200 Financial Statement Analysis: Applied Valuation
Financial Statement Analysis is a course in how to use accounting information to make business and investment decisions. Internally, the information is used to assess performance of units, to evaluate performance of upper level management, to monitor the firm’s investment and financing decisions, and for comparison purposes with the firm’s rivals. Externally, accounting information is used by financial analysts, investors, and (potential) acquirers to assess the value of the firm, by creditors to assess its credit-worthiness, and by regulators. The primary objective of this class is to help you develop and sharpen your analytic abilities in financial statement analysis paying particular attention to the incentives of producers and users of this information. In addition to explaining techniques, cases will be used to help you develop the tools and skills required. In preparing cases for class, you should work in a group and focus not on number crunching but on identification of problems and potential solutions. Only once these have been identified is number crunching valuable. Let me emphasize, this is a course in using accounting information (predominantly financial statements) for decision-making. As such, we will not spend time on the details of financial statement preparation and reporting except as they are relevant to our focus on analysis and decision-making.
Topics covered include:
- Business Strategy analysis: assessing the qualitative position of a firm’s business activities.
- Accounting analysis: assessing the quality of a firm’s earnings.
- Financial analysis: assessing the firm’s past performance. Prospective analysis: assessing the firm’s future prospects.
- Valuation using comparables and discounted cash flow analysis.
- Valuation using EBO (abnormal earnings) analysis.
- Credit analysis: assessing the firm’s ability to satisfy debt obligations.
MGMT 60300 Tax and Business Strategy (also listed as MGMT 69100A)
The objective of this course is to provide you with a framework for analyzing tax planning. Adopting this approach has two important advantages. First, the framework offers an approach to tax planning and business strategy that remains useful long after the next revision of the tax code. Second, it offers an approach that can be readily employed in an international setting. After developing the framework, it will be applied to a variety of business settings that integrate topics from accounting, finance, and economics in order to provide you with a more complete understanding of the role of taxes in business strategy. Throughout, two important concepts will be applied: the concept of implicit taxes (tax induced differences in before tax rates of return) and the concept of tax clienteles (the effect of cross sectional differences in tax rates). Topics covered include: Taxes and the organizational form for businesses (partnerships, corporations, MLPs, LLCs, LLPs, etc.) Taxes and the value of alternative savings vehicles Taxes and the creation of securities Taxes and the use of derivatives Taxes and the repackaging of ownership rights Tax free reorganizations and divestitures Taxes and their effects on activity.