Corporate Financial Strategy

Objective

This course provides, over 6 double sessions, the essentials of what one needs to know about corporate finance. The approach is practical, general, and rigorous, but without heavy theorization. Math is used only when necessary. It broadly covers what is taught in leading business schools, except that a systematic link is made with ENSAE's teaching in micro- and macroeconomics. Simple applied cases are covered during the sessions.

The course builds on the financial analysis and accounting course taught in the 2nd year. In practice, it is essential for following the more specialized courses offered in the 3rd-year curriculum, on M&A, structured financing, private equity, etc.—all areas that will seem easy, simply a matter of practice, once the concepts of this course have been mastered.

With this course, the student gets a foothold in any profession with a financial component.

The course visuals, fairly comprehensive and going beyond what will be presented in class, will be provided in advance. They may be modified during the course of teaching.

The instructor has extensive experience both as an investment banker, as CFO and then executive of a company in the financial sector, and as a teacher at ENSAE.

Assessment is structured as follows: 1– a series of multiple-choice quizzes (MCQs), during days 2 to 4, with the first two each worth 10% and the third worth 15%. The final exam will include an MCQ with more open-ended and substantial questions, worth 65% of the final grade.

The course is taught in French, but key concepts will systematically also be given in English.

Planning

The six chapters listed below are of variable length and are not rigidly fixed, so they do not necessarily correspond exactly to each of the six double sessions.

I. Understanding the firm

• The notion of risk and corporate risk
• A history of capitalism through the lens of risk
• Link with the microeconomic formalization of the firm
• The firm as a political space: shareholders, bondholders, employees, and others

II. Basics of financial analysis

• A business project. And a bit of accounting, which is to finance what music theory is to music.
• Review of the basics of actuarial calculation on financial securities
• Project financing

III. The firm and financial markets. The stock market perspective

• A restaurant story
• From balance sheet analysis to the stock market
• An intuition on the cost/return of capital
• A bit of stock market vocabulary

IV. How does a firm finance itself?

• How to properly manage the liquidity of one's balance sheet
• Credit risk: bankruptcy or default of the firm
• Is there an optimal debt/equity mix on the balance sheet?

V. The firm and financial markets: valuing the firm

• Valuing a stock? It's "like" valuing a bond!
• The challenge of company valuation
• Estimating the cost of equity
• Revisiting the notion of goodwill
• Fundamentals of company valuation
• DCF and comparables

VI. A look at the financial system and the State

• Banks, ordinary companies?
• Bank financing, bond financing. Key issues.
• Corporate debt, sovereign debt—any connection?
• Miscellaneous

References

A useful reference is the textbook used at HEC and available at the library: Finance d'entreprise - Pierre Vernimmen, by Pascal Quiry and Yann Le Fur, 2021.

This textbook does not go further than the proposed course, but does so in over 1,000 pages. Correspondences between the course and the textbook will be given. In fact, having taken the course is a good way to immerse yourself in it. Details and examples abound.