Finance 350 at Stanford, often referred to as “Advanced Corporate Finance,” is a highly regarded course typically taken by MBA students and advanced undergraduates. It delves into the complexities of financial decision-making within corporations, going far beyond introductory finance principles.
A key focus of the course is valuation. Students learn and apply sophisticated techniques for valuing companies, projects, and securities. This includes discounted cash flow (DCF) analysis, relative valuation (using multiples), and real options analysis, which incorporates flexibility and uncertainty into investment decisions. Emphasis is placed not just on the mechanics of these models, but also on understanding their underlying assumptions and limitations.
Capital structure decisions are another crucial area. The course examines the trade-offs between debt and equity financing, exploring concepts like the Modigliani-Miller theorem (and its assumptions), the tax benefits of debt, agency costs, and financial distress. Students analyze how companies can optimize their capital structure to maximize shareholder value, considering factors such as industry, growth prospects, and risk profile.
Mergers and acquisitions (M&A) also receive substantial attention. Students study the motives behind M&A deals, the valuation and negotiation processes involved, and the potential sources of value creation (or destruction). The course typically includes case studies of real-world M&A transactions, allowing students to apply their knowledge and critically evaluate the success of these deals.
Beyond these core topics, Finance 350 often touches upon specialized areas such as corporate governance, risk management, and international finance. Corporate governance focuses on the mechanisms used to align the interests of managers and shareholders, mitigating agency problems. Risk management explores techniques for identifying, measuring, and hedging various types of financial risks. International finance addresses the challenges of managing financial decisions in a global context, including currency risk and cross-border investment.
The course is typically taught using a combination of lectures, case studies, and problem sets. Case studies are particularly important, as they provide opportunities for students to apply theoretical concepts to real-world situations and develop their analytical and decision-making skills. Active class participation is usually encouraged, and students are expected to come prepared to discuss the assigned readings and cases.
Finance 350 is known for its rigor and its demanding workload. However, it is also considered to be a valuable learning experience for students who are interested in pursuing careers in investment banking, private equity, corporate finance, or other areas of finance. The course equips students with the analytical skills and financial knowledge necessary to succeed in these competitive fields. Moreover, the course’s emphasis on critical thinking and problem-solving makes it valuable for anyone seeking to make informed financial decisions, regardless of their career path.