Volume 39 CONTENTS Spring/Summer 2013
Are Universities Improving Student Financial Literacy? A Study of General Education Curriculum
Susan J. Crain
This study examines the undergraduate curriculum at 435 universities to determine whether personal financial literacy courses are allowed to fulfill a general education requirement. Only 37 of the schools show the course as an elective. While finance departments at these schools were instrumental in getting it placed within the general education curriculum, a survey of finance department chairpersons indicates that attempts at other universities have been unsuccessful due to the belief that the course does not fulfill the purpose of general education. A survey of administrators in academic affairs shows that a majority of them are in favor of the course while those who are opposed believe the topic should be addressed through co-curricular activities. Thus alternative approaches are suggested for introducing financial literacy initiatives on university campuses, including financial topics embedded within freshman seminars, survey courses and co-curricular training through financial literacy centers.
Using the Blackboard Course Management System to Analyze Student Effort and Performance
Michael F. Spivey and Jeffrey J. McMillan
This paper documents a novel use of the Blackboard course management system to investigate the relationship between student effort and performance. We measure student effort by tracking the number of times students access study resources that have been placed on the Blackboard system and then examine if more frequent access of the resources affects their grade performance. Our results indicate that performance is positively influenced by study effort. A more evenly spaced study schedule also has a positive effect on performance while cramming (i.e., intense studying in a short period of time immediately preceding an exam) does not. Cumulative GPR is found to be positively associated with performance in the course while gender, academic class, or semester credit load appear to have little influence.
Mandatory Prerequisite Testing and Performance in Intermediate Corporate Finance
L. Paige Fields
The purpose of this paper is to examine the association between mandatory prerequisite testing and performance in Intermediate Corporate Finance. Scores on prerequisite tests are strongly, positively related to Intermediate Finance course grades even after controlling for variables previously found to determine student Principles of Finance success. Because mandatory prerequisite testing results are highly indicative of ultimate performance in Intermediate Finance, this testing may be used to help counsel students regarding remedial actions they may take to improve course outcome.
Readability of Introductory Finance Textbooks
Kenneth J. Plucinski and Mojtaba Seyedian
Selection of a textbook for an introductory finance course can be challenging. Many criteria may be considered in such decisions, including a textbook’s readability level. Using the Flesch-Kincaid readability index, this study analyzes the predicted readability of five popular introductory finance textbooks. T-tests are performed to determine whether significant differences exist between the textbooks. The study finds that one text is clearly more readable than all of the others. These findings can be useful to adopters and editors of introductory finance textbooks.
Incorporating a Real-Time FX Trading Platform in an International Business Finance Class
Daniel A. Seiver
Recent advances in computer technology and internet speed have opened up new teaching possibilities for the International Business Finance (IBF) course. An entire class of IBF students can now engage in real-time, real-world, round-the-clock leveraged trading of foreign exchange, using a free platform identical to one used by actual real-money FX traders. This paper describes the platform, shows how to integrate this technology in an IBF course, and presents regression evidence that suggests that student learning is enhanced.
Clarifying the Risk-Return Implications of Operating Leverage as Presented in the Sales-NOI Relationship
Gia M. Chevis and John T. Rose
A topic that is commonly addressed in both principles of managerial accounting textbooks and fundamentals of business finance texts is operating leverage, which examines the effect of fixed operating costs on the relationship between a firm’s sales and its net operating income (NOI). However, no text—finance or managerial accounting—fully incorporates risk in a probability sense within the sales-NOI framework. This study extends the standard sales-NOI schema by presenting a numeric and graphical example to incorporate explicitly a probability distribution of sales within the sales-NOI construct. In so doing, we show the trade-off between higher expected NOI and a higher probability of negative NOI owing to greater operating leverage. Additionally, we provide a teaching plan to guide an instructor in explaining this risk-return trade-off using the example presented in this study. Finally, we encourage textbook authors to expand the traditional presentation of the sales-NOI relationship to show the greater probability of negative NOI from a cost structure of higher fixed costs and lower variable costs, thereby giving students a clearer understanding of the risk-return implications of operating leverage.
Barbarians in the Classroom: the Case of RJR Nabisco
George W. Kester
This paper describes how the variety of teaching materials related to the takeover battle for RJR Nabisco, including a Harvard Business School case, a best-selling book, articles in the popular press, and a full length motion picture can be utilized in the classroom to provide students with a multimedia and multidisciplinary perspective on one of the largest leveraged buyouts in history.
Time Value of Money Made Simple: A Graphic Teaching Method
A presented integrated time value of money graphic method helps students visualize and achieve a clearer understanding of time value of money. This tool helps students determine what type of time value of money problem they are dealing with as well as identify the variables involved in the problem. This method can be used as a visual aid to help students solve a problem when working with formulas or a financial calculator, or it can be used as the basis for a personalized time value of money spreadsheet template. This allows the students to understand the intuition behind time value of money concepts and problems and also helps them become proficient in the use of a financial calculator and/or spreadsheets to solve the problems. The tool developed in this paper will help our students be better prepared for careers in the fields of finance and accounting.
Case Study: Hotel Riscal for Wine Aficionados
Raymond H. Lopez
"We have been producing some of the finest wines from our vineyards and facilitates here for more than a century and now you propose that we construct a hotel? While I know that tourism is an important component of Spain’s economy, as well as the Rioja region, I am not convinced that this project will make much of a contribution."
Case Study: CSX’s Proxy Contest: A Battle of Metrics
Two dissident hedge funds jointly launched a proxy campaign against CSX management, proposing a slate of new directors at CSX’s 2008 annual meeting. The dissidents said CSX was mis-managed and provided statistics of poor performance and a poor operating record. CSX countered with statistics of its own, touting its safety record and showing how it could soon become the leading railroad if it stayed on the same track. CSX shareholders needed to decide whom to support in the coming annual meeting.