a. To develop an understanding of various aspects of Financial Management and acquire the ability to apply such knowledge in decision-making.
b. To understand various finance functions like financing decisions, investment decisions, and dividend decisions.
c. To develop an understanding of working capital management and its components.
Contents
1. Financial Management and Financial Analysis:
(i) Introduction to Financial Management Function:
a. Objective and scope of financial management.
b. Profit Maximisation, Wealth Maximisation and Value Creation.
c. Role of Financial Manager and Financial Controller.
d. financial management environment.
e. Functions of finance executives in an organization.
f. financial distress and insolvency.
(ii) Financial Analysis through Ratios:
a. Users of the financial analysis.
b. Sources of financial data for analysis.
c. Calculation and Interpretation of ratios.
d. Limitations of ratio analysis.
2. Financing Decisions and Cost of Capital:
(i) Sources of Finance:
a. Different Sources of Finance, Characteristics of different types of long-term debt and equityfinance, Method of raising long term finance.
b. Different Sources of short-term Finance.
c. Contemporary sources of funding- P2P lending, Equity funding, Crowdfunding, Start-up funding, etc.
d. Internal fund as a source of finance.
e. international sources of finance.
f. Other sources of finance- Lease Financing, Sale and leaseback, Convertible debt, venture capital, Grants etc.
(ii) Cost of Capital:
a. Significance of cost of capital.
b. Factors of cost of capital.
c. Measurement of costs of individual components of capital.
d. Weighted average cost of capital (WACC).
e. Marginal cost of capital.
(iii) Capital Structure Decisions:
a. Significance of capital structure.
b. Determinants of capital structure.
c. Capital structure planning and designing.
d.Designing of optimum capital structure.
e. Theories of Capital Structure and value of the firm-relevancy and Irrelevancy of capital structure.
f. EBIT- EPS Analysis, Breakeven- EBIT Analysis.
g. Under/ Over Capitalisation.
(iv) Leverages:
a. Types of Leverages- Operating, Financial and Combined.
b. Analysis of leverages.
3. Capital Investment and Dividend Decisions:
(i) Capital Investment Decisions:
a. Objective of capital investment decisions.
b. Methods of Investment appraisal:
- Payback period, Discounted payback period.
- Accounting Rate of Return (ARR).
- Net Present Value (NPV) - The meaning of NPV, Strengths and limitations of NPV method, The working capital adjustment in NPV analysis, Capital rationing, Equivalent Annual Costs.
- Internal Rate of Return (IRR) - Limitations of the IRR method, Multiple IRRS.
- Modified Internal Rate of Return (MIRR) - Definition and explanation of MIRR, Process for calculating MIRR, Strengths of the MIRR approach.
- Profitability Index.
(ii) Dividend Decisions:
a. Basics of Dividends.
b. Cash dividend, stock dividend/ bonus share, stock-splits, share buyback.
c. Determinants of dividend.
d. Relevancy and Irrelevancy of Dividend Policies- Traditional Approach, Walter's model, Gordon's model, Modigliani and Miller (MM) Hypothesis.
4. Management of Working Capital:
a. The management of working capital- Liquidity and Profitability.
b. The Working capital financing decisions-Primary and Secondary Sources of Liquidity.
c. The Working Capital Cycle (Operating Cycle), Effectiveness of Working Capital based on its operating and cash conversion cycles.
d. Assessment of working capital requirement.
e. Management of Accounts Receivables (Debtors).
f. Factoring and Forfaiting.
g. Credit Management:
- Credit granting.
- Monitoring accounts receivables.
- Debt collection.
h. Management of Accounts Payables (Creditors).
i. Management of Cash, Treasury management.
j. Banking norms of working capital finance.
