How to build an introduction to finance course: a complete guide for lecturers

Central question: what decisions does finance help an organisation make, and how do markets move capital between savers and users of funds?

Begin with finance as a decision discipline rather than a list of formulas. Students need a map of the financial system, the role of the financial manager and the central choices around investment, financing, liquidity and risk before they can see why later techniques matter.

What this concept covers

• The purpose of finance and the objective of creating sustainable economic value.
• Households, firms, financial intermediaries and capital markets.
• Investment, financing, payout and liquidity decisions.
• Agency problems, stakeholder claims and the role of governance.
• The distinction between accounting profit, cash flow and value.

Learning outcomes

By the end of this concept, students should be able to:

• Explain how capital moves through the financial system.
• Distinguish investment decisions from financing decisions.
• Identify the main responsibilities of a financial manager.
• Explain why cash flow and timing matter to value.
• Recognise conflicts of interest that can distort financial decisions.

How to teach it

• Open with a familiar company and ask where its cash comes from and where it goes.
• Map savers, banks, bondholders, shareholders, firms and markets on one board.
• Give students four managerial choices and ask whether each is an investment, financing, payout or liquidity decision.
• Use a short governance prompt to show that a financially attractive decision can still be poorly governed.

Case-style example

Orion Bikes has GBP 12 million of cash. Management can spend GBP 8 million on a plant with an estimated NPV of GBP 1.6 million, repay GBP 6 million of 7% debt, or pay a GBP 5 million special dividend. Students rank the choices, identify who gains or bears risk, and state what extra evidence they need. Two defensible priorities emerge: growth or balance-sheet resilience. Students discover that finance starts with objectives and trade-offs, not formulas.

Where students struggle

Students often equate finance with accounting or assume shareholder value means maximising the next period's profit. Keep returning to cash flows, timing, risk, incentives and opportunity cost.

Reading and a quick check

Use Chapter 1 of the core textbook, then ask students to classify three real company decisions as investment, financing, liquidity or payout decisions and justify each label.

Where it leads

The next step is to read the financial statements that describe what the organisation owns, owes, earns and converts into cash.

Central question: what do the income statement, balance sheet and cash flow statement reveal about financial performance, position and cash quality?

Introductory finance students need enough accounting to interpret cash generation, leverage and operating performance without turning the course into Financial Accounting. The teaching goal is to connect the three statements to decisions about value, risk and funding.

What this concept covers

• How the income statement, balance sheet and cash flow statement connect.
• Operating, investing and financing cash flows.
• Profitability, liquidity, efficiency and solvency ratios.
• Working capital accounts and the gap between earnings and cash.
• The quality of earnings and the limits of ratio analysis.

Learning outcomes

By the end of this concept, students should be able to:

• Interpret the three principal financial statements.
• Calculate and explain a focused set of financial ratios.
• Reconcile profit growth with changes in operating cash flow.
• Identify signs of liquidity or earnings-quality pressure.
• Use financial statements to frame a financing or investment question.

How to teach it

• Use one company across all three statements rather than three disconnected worksheets.
• Ask students to trace a credit sale, inventory purchase and capital expenditure through the statements.
• Limit the first ratio set to measures students will reuse later in valuation, debt and working capital.
• Require a one-paragraph diagnosis after every calculation.

Case-style example

Meridian Retail grows revenue from GBP 80 million to GBP 92 million and net income from GBP 6 million to GBP 7 million, but operating cash flow falls from GBP 8 million to GBP 3 million. Receivables rise from GBP 10 million to GBP 17 million and inventory from GBP 12 million to GBP 18 million. Students calculate margin changes and working-capital movements, then decide whether the business became stronger or weaker. Students discover that rising profit can mask deteriorating cash quality.

Where students struggle

Students can calculate ratios without knowing what changed operationally. Make every ratio answer the question: what business behaviour could produce this number, and what would you verify next?

Reading and a quick check

Pair Chapter 2 with the CFA Institute refresher on financial statement analysis. A quick check is to ask students why net income can increase while cash from operations falls.

Where a simulation fits

The Financial Statement Analysis Simulation fits directly after this concept. Students analyse the three statements across multiple periods, calculate ratios and form a share-price view, which turns statement reading into an individual evidence trail for debrief and assessment.

Where it leads

Once students can identify cash flows, the course can ask the central valuation question: what are cash flows at different dates worth today?

Central question: how should cash flows at different dates be compared on a common basis?

Time value of money is the mathematical spine of introductory finance. Teach it as a cash-flow timing problem first and a formula problem second, so students learn to recognise whether they need present value, future value, discounting, compounding, an annuity or a perpetuity.

What this concept covers

• Present value and future value.
• Compounding and discounting.
• Ordinary annuities, annuities due and perpetuities.
• Nominal rates, periodic rates and effective annual rates.
• Timeline notation and spreadsheet functions.

Learning outcomes

By the end of this concept, students should be able to:

• Calculate present and future values for single cash flows.
• Value annuities and perpetuities.
• Match rates and compounding periods correctly.
• Translate a verbal problem into a cash-flow timeline.
• Use Excel or a financial calculator without losing the economic logic.

How to teach it

• Make students draw the timeline before touching a formula.
• Mix problem types so the required method is not signposted in the question title.
• Require a reasonableness check after the numerical answer.
• Use both algebraic notation and spreadsheet functions so technique does not depend on one tool.

Case-style example

GreenGrid can pay GBP 6.0 million today for equipment or GBP 7.3 million in three years. The finance team uses 7%, while the project sponsor argues for 10% because delivery risk is high. A maintenance alternative requires five year-end payments of GBP 1.2 million. Students compute present values under both discount rates, compare the choices and defend the rate assumption. Students discover that the discount rate can change the ranking even when cash flows are fixed.

Where students struggle

The most common errors are timing, rate conversion and choosing the wrong unknown. A correct-looking formula with the wrong timeline is still wrong.

Reading and a quick check

Use Chapters 3 and 4. Close with a mixed set in which students must name the TVM method before entering any numbers.

Where a simulation fits

The Time Value of Money Simulation is a primary fit here. It gives each student randomised problems, requires method selection before numerical entry and provides individual answers and worked solutions for a targeted debrief.

Where it leads

With a common valuation language in place, students can price contractual cash flows such as bonds and understand how interest rates change value.

Central question: how do interest rates determine the value and risk of promised debt cash flows?

This concept turns TVM into security valuation. The aim is not to build a fixed-income elective, but to help students connect market rates, bond prices, yields, maturity and financing cost.

What this concept covers

• Quoted versus effective interest rates.
• Bond cash flows, coupon rates, yields and maturity.
• Premium, par and discount pricing.
• Interest-rate risk and the inverse price-yield relationship.
• The borrower and investor perspectives on debt.

Learning outcomes

By the end of this concept, students should be able to:

• Price a plain-vanilla bond from promised cash flows.
• Interpret yield to maturity as a market-required return.
• Explain why bond prices move when yields change.
• Distinguish coupon rate from current market yield.
• Connect debt valuation to a firm's financing cost.

How to teach it

• Begin with a bond timeline and reuse the TVM framework.
• Move yields up and down and ask students to predict direction before calculating price.
• Compare the investor who owns the bond with the firm that issued it.
• Use spreadsheet sensitivity tables for yield and maturity.

Case-style example

Atlas Utilities has a GBP 1,000 bond with an annual 6% coupon and eight years remaining. Comparable bonds now yield 7.5%. The firm can also refinance with floating-rate debt at base rate plus 2%. Students price the existing bond, explain why it trades below par and compare the predictability of fixed-rate financing with floating-rate exposure. Students discover that the same rate movement affects both investor value and corporate financing risk.

Where students struggle

Students frequently confuse coupon rate, yield and required return. Keep the question explicit: which rate sets the cash payment, and which rate discounts that payment today?

Reading and a quick check

Use Chapters 5 and 6. A quick check asks students to explain, without a formula, what happens to a fixed-rate bond when market yields rise.

Where it leads

Debt valuation prepares students to value uncertain residual cash flows and think about why equity prices depend on expectations rather than contractual payments.

Central question: how can students form a defensible estimate of equity value when future cash flows and growth are uncertain?

At introductory level, equity valuation should build intuition about cash flows, growth and required return, not false precision. Dividend discount logic and simple market multiples are enough to show that a share price is a present value of expectations.

What this concept covers

• Equity as a residual claim.
• Dividend discount and constant-growth valuation.
• Growth, payout and required return.
• Price multiples as market benchmarks.
• Why observed market price and estimated intrinsic value may differ.

Learning outcomes

By the end of this concept, students should be able to:

• Value a simple dividend-paying share.
• Explain how growth and required return affect value.
• Use a small comparable-multiple set cautiously.
• Distinguish market price from an estimate of intrinsic value.
• Identify assumptions that make an equity valuation fragile.

How to teach it

• Start with a simple no-growth or constant-growth company.
• Ask students to change one assumption at a time and describe the direction of value.
• Compare a DDM estimate with a P/E benchmark rather than insisting they match.
• Make students state which assumption deserves the most challenge.

Case-style example

CloudSpring expects free cash flow of GBP 4 million next year, 5% annual growth for five years and 2.5% long-run growth. The class uses a 9% required return, while comparable listed software firms trade at 9x to 11x EBITDA on current EBITDA of GBP 8 million. Students build a valuation range and explain why the methods differ. Students discover that valuation is an argument about assumptions, not a single correct number.

Where students struggle

Students can become overconfident when a spreadsheet returns a precise answer. Require ranges, sensitivities and a sentence describing what would make the estimate wrong.

Reading and a quick check

Use Chapters 7 and 10 selectively. Close by asking students to name the two assumptions that most change their valuation range.

Where a simulation fits

The Financial Statement Analysis Simulation can support this concept if used as the evidence stage before valuation. Students use the statements and ratios to form expectations, then the lecturer asks how those expectations would affect a market view.

Where it leads

Valuation becomes managerial decision-making in capital budgeting, where students decide whether a new project creates value for the firm.

Central question: which long-term investments should a firm accept when cash flows, risk and capital are limited?

Capital budgeting is where the course starts to feel like managerial finance. Students should compare NPV, IRR, profitability index and payback, then learn why NPV remains the value-creation anchor when ranking rules conflict.

What this concept covers

• Relevant incremental cash flows and sunk costs.
• NPV, IRR, profitability index and payback.
• Mutually exclusive projects and capital rationing.
• Sensitivity, scenario analysis and project risk.
• Post-investment discipline and assumptions review.

Learning outcomes

By the end of this concept, students should be able to:

• Calculate and interpret common project appraisal measures.
• Identify relevant incremental cash flows.
• Explain why NPV and IRR can disagree.
• Rank projects under a fixed capital budget.
• Defend a project recommendation under uncertainty.

How to teach it

• Teach the cash-flow definition before the appraisal metric.
• Use one pair of projects where NPV and payback point in different directions.
• Add a capital constraint so students must allocate rather than accept everything positive-NPV.
• Finish with a one-page CFO recommendation, not a calculation sheet.

Case-style example

Alpine Logistics compares Project A, costing GBP 5 million and generating GBP 1.8 million annually for four years at a 9% hurdle rate, with Project B, costing GBP 7 million and generating GBP 2.3m, GBP 2.6m, GBP 2.8m and GBP 3.0m at 11%. The division can invest only GBP 8 million. Students calculate NPV, IRR and payback, then recommend a project. Students discover that ranking metrics can disagree and that scale and risk matter.

Where students struggle

Students often treat every appraisal rule as equally authoritative or forget that the model is only as good as the cash flows and discount rate. Ask what information is omitted before asking which project wins.

Reading and a quick check

Use Chapters 8 and 9 plus the recent research on hurdle rates. A quick check asks students to explain why a short-payback project can still destroy value.

Where a simulation fits

The Capital Budgeting Simulation is the strongest applied fit. Students act as CFO, appraise projects with NPV, IRR, profitability index and payback, then allocate a fixed budget across a portfolio, creating direct evidence of both calculation and choice.

Where it leads

Project decisions introduce risk explicitly. The course can now ask how uncertainty is priced and how diversification changes the risk a decision-maker should care about.

Central question: which risks can investors diversify away, and which risks should command a higher expected return?

Students need to move beyond the intuition that higher risk simply means higher volatility. This concept establishes expected return, variance, covariance, correlation and the portfolio effect before CAPM introduces systematic risk.

What this concept covers

• Historical and expected return.
• Variance, standard deviation and covariance.
• Correlation and diversification.
• Portfolio expected return and portfolio risk.
• Systematic versus diversifiable risk.

Learning outcomes

By the end of this concept, students should be able to:

• Calculate expected return and basic risk measures.
• Explain why correlation matters to portfolio risk.
• Combine assets into a simple portfolio.
• Distinguish company-specific from systematic risk.
• Interpret diversification as a portfolio decision rather than a slogan.

How to teach it

• Use two assets with visibly different correlations.
• Ask for directional predictions before asking for variance calculations.
• Plot simple risk-return points so students see the opportunity set.
• Connect diversification back to project and security decisions already taught.

Case-style example

Terra Tech has an expected return of 14% and volatility of 30%; CityGrid Utilities has an expected return of 8% and volatility of 12%. Their correlation is -0.20. Students calculate the expected return of a 60/40 portfolio and estimate its risk using the covariance formula, then compare it with holding Terra Tech alone. Students discover that portfolio risk can fall materially without giving up a proportionate amount of expected return.

Where students struggle

Students often average volatilities as if portfolio risk were a weighted-average return. Keep correlation visible in every example.

Reading and a quick check

Use Chapter 11 and the CFA Portfolio Risk and Return Part I refresher. Close with a one-minute explanation of why two risky assets can make a less risky portfolio.

Where it leads

Diversification sets up CAPM, which asks which component of risk investors are compensated for bearing and how required return can be estimated.

Central question: how can market risk be translated into a required return for a security or project?

CAPM is useful in an introductory course when it is taught as a disciplined benchmark, not as a law. Students should be able to calculate beta-based expected return and then critique the assumptions and estimation problems.

What this concept covers

• Beta and systematic risk.
• The risk-free rate and market risk premium.
• CAPM and the security market line.
• Expected versus required return.
• Practical limitations of beta and model-based hurdle rates.

Learning outcomes

By the end of this concept, students should be able to:

• Calculate a CAPM required return.
• Interpret beta economically.
• Explain the role of the market risk premium.
• Distinguish total volatility from systematic risk.
• Critique when CAPM may be a weak decision benchmark.

How to teach it

• Plot three securities on a simple security market line.
• Ask students what beta does and does not measure.
• Compare the CAPM estimate with an alternative hurdle rate set by management.
• Use the model as an input to a decision, then force a challenge to its assumptions.

Case-style example

Beacon Foods has beta 0.8, while Vertex Media has beta 1.5. With a 3.5% risk-free rate and a 5.5% market risk premium, students calculate CAPM required returns, then compare them with management hurdle rates of 10% and 13%. They decide which discrepancy deserves more investigation and what evidence could justify it. Students discover that a calculated required return is a benchmark that still needs judgement.

Where students struggle

Students may believe beta captures every form of business risk or that CAPM gives an exact true return. Make estimation error and model assumptions part of the marked answer.

Reading and a quick check

Use Chapter 12 and the CFA Portfolio Risk and Return Part II refresher. A quick check asks what kind of risk diversification cannot remove.

Where a simulation fits

The Portfolio Management Simulation fits after students know CAPM, Sharpe ratios and basic mean-variance ideas. Teams manage a hedge-fund or pension-fund mandate across multiple quarters, making portfolio construction and rebalancing an applied extension of this concept.

Where it leads

Required return becomes a firm-level hurdle when the course combines the cost of equity with after-tax debt to estimate the weighted average cost of capital.

Central question: what return should a firm require before committing capital to a project with a given risk profile?

WACC connects capital markets to capital budgeting. The key teaching point is that the corporate WACC is not a universal hurdle rate for every project. Students need to estimate it, understand its inputs and know when project risk requires an adjustment.

What this concept covers

• After-tax cost of debt and cost of equity.
• Market-value weights and WACC.
• Marginal versus historical financing cost.
• Corporate WACC versus project-specific hurdle rates.
• Sensitivity to beta, risk premium, credit spread and target capital structure.

Learning outcomes

By the end of this concept, students should be able to:

• Calculate a basic WACC.
• Use market-value capital weights appropriately.
• Explain the tax effect on debt cost.
• Identify when the corporate WACC is not an appropriate project discount rate.
• Defend a hurdle-rate choice using project risk.

How to teach it

• Build WACC from the CAPM and a simple borrowing rate.
• Change the capital weights and ask what actually causes the economic change.
• Give a high-risk project and a low-risk project and force students to reject one common rate.
• Discuss the difference between observed cost of capital and internal hurdle rates.

Case-style example

Summit Health finances itself with 40% debt at a 7% pre-tax cost and 60% equity at a 10.5% required return. With a 40% corporate tax rate, the implied WACC is 7.98%. A new diagnostics project has an expected IRR of 8.4% but materially higher operating risk than the existing business. Students calculate WACC and decide whether 7.98% is a defensible hurdle. Students discover that corporate WACC should not automatically approve every project just above it.

Where students struggle

Students can compute WACC mechanically but use book weights, forget tax effects or apply one company rate to every project. Reward the explanation of fit, not only the number.

Reading and a quick check

Pair Chapter 13 with Gormsen and Huber on corporate discount rates. A quick check asks why a company might use a hurdle rate above its estimated financial cost of capital.

Where a simulation fits

The Capital Budgeting Simulation can be extended here by asking students to revisit project choices under alternative hurdle rates and explain which selections are most sensitive to the discount-rate assumption.

Where it leads

Once the cost of capital is visible, students can evaluate how the firm chooses between debt and equity and how financing changes resilience, control and risk.

Central question: how should a firm choose between debt, equity and other sources of finance?

At introductory level, capital structure should emphasise trade-offs rather than theorem proof. Students need to see how debt can be cheaper and tax-advantaged while increasing fixed obligations, refinancing risk and constraints on flexibility.

What this concept covers

• Debt versus equity and hybrid financing.
• Interest, tax shields, maturity and repayment.
• Leverage, coverage and default risk.
• Dilution, control and equity issuance.
• The trade-off between financing cost and financial flexibility.

Learning outcomes

By the end of this concept, students should be able to:

• Compare debt and equity financing from the firm's perspective.
• Calculate simple interest coverage and leverage measures.
• Explain how leverage changes risk to equity holders.
• Identify qualitative trade-offs around control and flexibility.
• Recommend a financing route for a stated business need.

How to teach it

• Give teams the same funding need but different business risk profiles.
• Ask one group to argue as borrower and another as lender.
• Use coverage and leverage metrics as constraints, not as automatic answers.
• Finish with a financing recommendation that names the rejected alternative.

Case-style example

BrightSoft generates GBP 15 million of EBITDA and has GBP 30 million of existing debt at 6%. It needs GBP 20 million for expansion. A new loan would cost 8%, while an equity issue would dilute existing owners by 25%. Students calculate pro forma interest coverage, discuss control and refinancing risk, and recommend debt or equity. Students discover that financing changes who bears risk and how much room the company has for execution error.

Where students struggle

Students often frame debt as cheap and equity as expensive without asking why the required return differs. Connect pricing to risk, claims, control and cash-flow obligations.

Reading and a quick check

Use Chapters 14 to 16 selectively and the recent research on corporate flexibility. A quick check asks which financing choice creates the largest fixed cash commitment.

Where a simulation fits

The Debt Financing Simulation fits after students know debt, equity and basic leverage. Borrower and lender teams negotiate loan amount, pricing, maturity, repayment, security, guarantees, seniority and covenants, making the financing trade-off visible from both sides.

Where it leads

Long-term financing is only part of financial management. Students also need to see how everyday receivables, inventory and payables determine liquidity and funding needs.

Central question: how should a firm balance liquidity, operating efficiency and commercial relationships in day-to-day finance?

Working capital gives students a tangible bridge between accounting numbers and managerial choices. Rather than teaching the cash conversion cycle as a ratio exercise, make students decide whether releasing cash is worth the operational or commercial cost.

What this concept covers

• Receivables, inventory and payables.
• DSO, DIO, DPO and the cash conversion cycle.
• Short-term funding and liquidity buffers.
• Credit terms, inventory policy and supplier relationships.
• The trade-off between cash release and operating resilience.

Learning outcomes

By the end of this concept, students should be able to:

• Calculate the cash conversion cycle.
• Diagnose which working-capital account is tying up cash.
• Estimate the cash effect of changing operating days.
• Evaluate trade-offs between liquidity and operating performance.
• Recommend a short-term financial management action.

How to teach it

• Build the CCC from a simple income statement and balance sheet.
• Give each team one lever: receivables, inventory or payables.
• Attach a commercial consequence to every apparent cash improvement.
• Ask students to explain what a bank would worry about versus what operations would worry about.

Case-style example

Harbor Home has GBP 60 million of sales, GBP 36 million of cost of goods sold, DSO of 55 days, DIO of 70 and DPO of 35. It can cut DSO to 45 with a 2% sales loss, reduce DIO to 55 with a GBP 1 million contribution risk from stockouts, or stretch DPO to 45 and lose GBP 0.3 million of supplier discounts. Students estimate cash release and recommend a policy. Students discover that the lowest CCC is not automatically the best business decision.

Where students struggle

Students can optimise each ratio independently and miss the operating system. Always attach customers, stock availability and suppliers to the numbers.

Reading and a quick check

Use Chapters 19 and 20. Close with a one-paragraph answer to: when could a longer cash conversion cycle be commercially rational?

Where a simulation fits

The Working Capital Management Simulation is a direct fit. Students act as CFO across a 12-month scenario, make receivables, inventory and payables decisions and finish with an expansion recommendation based on liquidity and operating evidence.

Where it leads

The final concept integrates investment, financing, portfolio, liquidity, evidence quality and governance into a single decision process.

Central question: how should students combine valuation, risk, financing, liquidity and governance when no single metric gives the answer?

An Introduction to Finance course should end by integrating the tools rather than adding another formula. Students need practice making a recommendation in which a positive NPV, attractive financing and plausible forecast can still be challenged by risk, incentives, incomplete information or governance.

What this concept covers

• Integrating investment, financing and liquidity decisions.
• Scenario analysis and evidence quality.
• Agency, incentives and conflicts of interest.
• Ethical use of forecasts and disclosure.
• Decision memos, oral defence and post-decision review.

Learning outcomes

By the end of this concept, students should be able to:

• Integrate multiple financial analyses into one recommendation.
• Identify conflicts between financial metrics and stakeholder or governance concerns.
• Distinguish a model output from a decision.
• Defend assumptions under challenge.
• State what evidence would change a recommendation.

How to teach it

• Use a CFO-style case with conflicting metrics.
• Require students to name one assumption they would defend and one they would revise.
• Use a short oral challenge so polished writing cannot substitute for judgement.
• Ask groups to compare decisions, not just calculations.

Case-style example

Evergreen Manufacturing can expand with an estimated NPV of GBP 3.0 million if an environmental retrofit is deferred, but only GBP 0.5 million if the retrofit is included now. Debt-funded expansion would raise debt/EBITDA from 3.0x to 3.4x, and management bonuses are tied to next-year EPS. Students recommend a route and disclose incentive conflicts, financing headroom and missing evidence. Students discover that financial governance requires challenging incentives and assumptions, not simply selecting the highest spreadsheet NPV.

Where students struggle

Students often search for one metric that closes the case. The objective is the opposite: make them reconcile multiple metrics, uncertainty and incentives in a defensible decision.

Reading and a quick check

Use an integrative review of Chapters 1, 9, 13, 16 and 20. A quick check asks students to name what evidence would make them reverse their final recommendation.

Where a simulation fits

Use evidence from earlier applied simulations as inputs to the capstone rather than adding a new product. For example, students can carry forward their Capital Budgeting, Debt Financing or Working Capital Management decisions and explain whether they would still defend them after the full course.

Where it leads

This closes the course by shifting from technique to judgement: students should be able to calculate, interpret, recommend and defend.

10-week course structure

A 10-week course should compress adjacent topics without deleting the decision lifecycle. Combine statements with foundations, integrate security valuation and keep capital budgeting, risk, financing and working capital visible.

14-week course structure

A 14-week course creates room for deeper practice, a separate WACC session and more simulation reflection. Use the extra time to increase decision quality rather than simply adding formulas.

The Time Value of Money Simulation is a 1-2 hour single-player experience designed for foundational finance. Students interpret a financial scenario, identify the timing, rate, periods and unknown, select the appropriate PV, FV, discounting, compounding or annuity method, and enter a precise numerical result. The live page describes a short Intro, 30-minute Preparation, 30-minute Timed Game and untimed Reflection.

Why it fits here

By Session 3, students should already know the core methods. The simulation therefore tests recognition and application, rather than introducing formulas for the first time.

What students do

• Review the core TVM concepts and worked formula and Excel examples during Preparation.
• Receive a randomised sequence of financial problems in the Timed Game.
• Diagnose the cash-flow structure before selecting the method.
• Calculate and submit numerical answers individually.
• Review their score, ranking, attempted questions and worked solutions during Reflection.

Recommended course placement

• At the end of Session 3 after TVM teaching.
• In one 1-2 hour class, or split Preparation and Timed Game across two meetings.
• Before bond valuation, so the debrief can correct timing and rate errors that would otherwise compound later.

Knowledge students should have before the simulation

• Present value and future value.
• Discounting and compounding.
• Basic annuity logic.
• Matching rates to periods.
• Simple spreadsheet or financial-calculator use.

Delivery format

Suggested debrief questions

• Which error came from choosing the wrong method rather than doing the arithmetic badly?
• Where did rate conversion or timing create the largest error?
• Which question looked similar to another but required a different TVM method?
• How would you check whether an answer is economically reasonable before submitting it?
• What habit should students carry into bond valuation and capital budgeting?

The Capital Budgeting Simulation is a 1-2 hour single-player business simulation in which each student acts as CFO. Students appraise projects using NPV, IRR, profitability index and payback, then allocate a fixed USD 10 million budget across a portfolio of independent projects. The live product page describes an introductory stage, project-selection work, results, a capital-allocation stage and final reflection.

Why it fits here

Students already know the appraisal rules, relevant cash-flow logic and the reason NPV matters. The simulation then adds a scarce-capital decision, forcing them to move from calculating each project to selecting a portfolio.

What students do

• Take the role of CFO and review project information, cash flows and discount rates.
• Calculate NPV, IRR, profitability index and payback for competing opportunities.
• Select the strongest project in the first decision stage and explain the choice.
• Receive a fixed USD 10 million budget and choose among eight independent projects.
• Compare the value created by the selected portfolio with the optimal allocation and reflect on why any ranking differences occurred.

Recommended course placement

• After Session 6, once NPV, IRR, profitability index, payback and relevant cash flows are established.
• In one applied class or with selected preparation moved outside class.
• Before WACC, with a later revisit in Session 9 to test how hurdle-rate changes affect choices.

Knowledge students should have before the simulation

• Time value of money.
• Relevant project cash flows.
• NPV and IRR.
• Profitability index and payback.
• Basic interpretation of discount rates and project risk.

Delivery format

Suggested debrief questions

• Which metric drove your first project choice, and should it have?
• Where did NPV and another metric point in different directions?
• How did the fixed budget change the decision compared with evaluating projects independently?
• Which assumption would most likely change your selected portfolio?
• What would you write in a two-paragraph CFO recommendation after seeing the optimal allocation?

Simulation outputs are evidence, not an automatic grade. Use the product evidence alongside a rubric that rewards method, assumptions, interpretation and decision quality. For team-based simulations, add individual evidence because a team outcome does not show which student made which argument.

Grading with the Time Value of Money Simulation

Students work individually through randomised TVM problems and submit numerical answers. Lecturers may assess:

• Correct identification of the required TVM method.
• Calculation accuracy and appropriate rate/period treatment.
• Error diagnosis using attempted questions and worked solutions.
• A short reflection explaining one corrected misconception.

Grading with the Capital Budgeting Simulation

Students act as CFO, appraise projects and allocate a fixed budget. Lecturers may assess:

• Accuracy and interpretation of NPV, IRR, PI and payback.
• Quality of project-ranking logic.
• Treatment of the capital constraint.
• Written justification of the selected portfolio and the assumptions that could change it.

Grading with the Financial Statement Analysis Simulation

Students analyse income statement, balance sheet and cash flow information across reporting periods and form a financial view. Lecturers may assess:

• Correct ratio calculation.
• Ability to connect ratios to statement movements.
• Diagnosis of cash-flow and earnings-quality signals.
• Quality of the evidence used to support the final view.

Grading with the Portfolio Management Simulation

Teams manage a hedge-fund or pension-fund mandate across multiple quarters. Lecturers may assess:

• Portfolio construction in light of the assigned mandate.
• Use of CAPM, Sharpe, beta, covariance and volatility evidence.
• Quality of rebalancing decisions and explanation of risk changes.
• Individual post-simulation note explaining one team decision and its trade-off.

Grading with the Debt Financing Simulation

Borrower and lender teams analyse the business and negotiate a complete loan package. Lecturers may assess:

• Use of leverage, coverage and cash-flow evidence.
• Consistency between credit risk and proposed price, maturity, security and covenants.
• Quality of negotiation rationale and rejected terms.
• Individual explanation of the final package and one unresolved risk.

Grading with the Working Capital Management Simulation

Students act as CFO and make receivables, inventory and payables decisions across a 12-month scenario. Lecturers may assess:

• Accuracy of CCC and working-capital calculations.
• Quality of policy decisions across DSO, DIO and DPO.
• Recognition of commercial trade-offs and liquidity constraints.
• Evidence supporting the final expansion, cautious expansion or delay recommendation.

The platform records submitted answers, decisions and comparative outcomes. That evidence supports your academic judgement; it does not replace it. Where a simulation is team-based, add an individual assumptions note, reflection or oral defence because the platform evidence does not establish which individual student made which argument.