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Course Outline-M. FINANCE

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Course Outline-M. FINANCE Powered By Docstoc
					              The Institute of Management Sciences
                                        Course Outline

Basic Information
                         Study Program:       MBA

                                Semester:     Fall-2009

                      Course Code/Title:      FNC – 512/Financial Management

                            Credit Hours:     3

                         Pre-Requisites:      ACC – 401, ACC520

                       Resource Person:       Ale Imran Siddiqi (FCMA, FCA, FCIS, FPA)

                     Lectures per week:       2
                                              Tuesday & Thursday 4:00 to 6:00 PM Sec C
                                   Timing:
                                              Friday & Saturday 6:00 to 8:00 PM Sec E

Capsule Statement
     Write capsule statement here.

     The Finance Manager plays an important part in the operation of the firm to understand
     why this is so, we must look closely at the role of finance function within the firm, the key
     functions of the finance manager, and his overall goal. As the organization grows attention
     is given to the evaluation of the firm's financial position and the acquisition of short term
     financing. As the firms approach a large scale, the finance function grows to include
     decision with respect of the acquisition of fixed assets, obtaining funds to finance the
     operation, and the distribution of corporate earning to shareholders. His three primary
     functions are (1) the analysis of financial data (2) the determining of the firm's asset
     structure, and (3) determining of its financial structure. Therefore, we would be putting
     more emphasis on Financial Analysis and planning, management of working capital and
     short term financing, forecasting and budgeting, sources and uses of capital and financial
     consideration in financial decision making.

Learning Objectives
        1.      Primarily to prepare the firm's financial plans, budgets and perform financial
                forecasting and financial comparison.
        2.      Maintain and control the firm's daily cash balances, and short term investments;
                coordinate the short term borrowing and banking relationship.
        3.      Understand the relationship between financial institutions and market.
        4.      Understand firm's overall goal of maximizing the owner's wealth ,long run
                strategy and profit maximization
                                       MANAGERIAL ACCOUNTING
                                        Schedule of Lectures

                                                                                                Book Title /
Week #                           Topics/contents to be covered
                                                                                                 Chapter#
         THE ROLE AND ENVIRONMENT OF MANAGERIAL FINANCE, finance function,                      Principles of
         primary activities of the finance manager, Relation to economics and accounting,        Managerial
  1
         Legal forms of business, Goal of the firm, corporate governance, the role of ethics,     Finance
         and the agency issue,                                                                   Chapter 1
         THE ROLE AND ENVIRONMENT OF MANAGERIAL FINANCE,                                        Chapter – 1
  2      Financial institutions and markets and the role they play in managerial finance,
         business taxes and their importance in financial decisions.
         FINANCIAL STATEMENT AND ANALYSIS                                                       Chapter – 2
         The stockholders report, the four key financial statement notes to the financial
  3
         statement, consolidated international financial statement, types of ratio
         comparison, ratios to analyze a firm’s liquidity and activity.
         FINANCIAL STATEMENT AND ANALYSIS                                                       Chapter – 2
         Relationship between debt and financial leverage and the ratios used to analyze a
  4      firm’s debt, ratios to analyze a firm’s profitability and its market value, summary
         of financial ratios and the DuPont system of analysis to perform a complete ratio
         analysis.
         CASH FLOWS AND FINANCIAL PLANNING                                                      Chapter – 3
         Tax deprecation procedures and the effect of deprecation on the firm’s cash flows,
         firm’s statement of cash flows, operating cash flow, and free cash flow, The
  5      financial planning process, Long-Term (strategic) financial plans, cash planning
         process and the preparation, evaluation, and use of the cash budget, simplified
         procedures used to prepare and evaluate the pro forma income statement and the
         pro forma balance sheet, and the common uses of pro forma statements
         TIME VALUE OF MONEY                                                                    Chapter – 4
         Role of time value in finance, the use of computational tools and the basic patterns       &
         of cash flow, concepts of future value and present value, their calculation for         Chapter 5
         single amounts and the relationship between them, future value and the present
         value of both an ordinary annuity due, and find the present value of a perpetuity,
         future value and the present value of a mixed stream of cash flows, Effect of
         compounding interest, determining deposits needed to accumulate a future sum,
  6
         loan amortization, finding interest or growth rates, an unknown number of
         periods. RISK AND RETURNS Fundamentals, risk of single assets, risk of a
         portfolio, the capital assets pricing model (CAPM) Risk and return defined , risk
         preference, risk assessment, risk, types of risk a measurement, portfolio return
         and standard deviation, correlation, diversifications. The model :CAPM, Reviews
         questions, solve practical problems, integrative case;

         INTEREST RATES AND BOND VALUATION                                                      Chapter – 6
         Fundamentals the term structure on interest rate, legal aspects of bond financing          &
         and bond cost, general features, quotations, ratings, popular types, and                Chapter 7
         international issues of corporate bonds, key inputs and basic model used in the
         valuation process, basic valuation model to bonds, impact of required return,
         maturity on bond values, yield to maturity (YTM), calculation, value bonds used,
  7
         interest semiannually. STOCK VALUATION Debt & equity capital, rights,
         characteristics, features preferred stock, process of issuing common stock, going
         public, investment banker, interpreting stock quotations, concept of market
         efficiency, basic common stock valuation, zero growth, constant growth, variable
         growth models, free cash flow valuation model, book value, liquidation value (P/E)
         price/ earnings multiples approaches, financial decisions, firm’s value.
         CAPITAL BUDGETING CASH FLOWS                                                           Chapter – 8
         Key motives for capital expenditure, steps in the capital budgeting process, capital       &
         budgeting terminology, cash flows, expansion versus replacement decision, sunk         Chapter – 9
         costs, international capital budgeting, investment associated with a proposed
  8      capital expenditure, relevant operating cash inflows, terminal cash flow associated
         with a proposed capital expenditure. CAPITAL BUDGETING TECHNIQUES Role
         of capital budgeting techniques, interpret, evaluate the payback period, net
         present value (NPV), internal rate of return, value profiles to compare NPV & IRR,
         terms of conflicting rankings, theoretical and practical strengths of each approach.
         RISK AND REFINEMENTS IN CAPITAL BUDGETING                                                                  Chapter – 10
         Importance of recognizing risk, capital budgeting projects, breakeven cash inflow,                              &
         sensitivity, scenario analysis, unique risks multinational companies face, risk                            Chapter – 11
         adjusted discount rates (RADRs), practical aspects of RADRs, Annualized net
         present values (ANPVs), real options, objective, procedures for selecting projects
9        under capital rationing. THE COST OF CAPITAL Key assumptions, the basic
         concept, specific sources of capital associated, long term debt and the cost of
         preferred stock, common stock equity, new issues of common stock, weighted
         average cost of capital (WACC), economic value added (EVA), break points,
         weighted marginal cost of capital (WMCC), investment opportunities schedule
         (IOS)
         LEVERAGE AND CAPITAL STRUCTURE
         Leverage, capital structure, breakeven analysis, relationships among them, types                           Chapters – 12
         of capital, external assessments, capital structure theory, optimal capital                                     &
10
         structure, EBIT – EPS approach, risk of alternative capital structures, DIVIDEND                           Chapters – 13
         POLICY Dividend payment procedures, theory of dividends, factors involved in
         establishing a dividend policy, basic types of dividend policies, stock dividends,
         WORKING CAPITAL AND CURRENT ASSETS MANAGEMENT
         Networking capital, cash conversion cycle, inventory management, credit                                    Chapters – 14
11       monitoring, credit standard. CURRENT LIABILITIES MANANGMENT                                                     &
         Accounts payables and use of accruals, unsecured bank sources of short term                                Chapters – 15
         loans, international short term loans, secured short term loans,
         HYBIRD AND DERIVATIVE SECURITIES
12       Hybrid and derivative securities, leasing arrangements, convertible securities,                            Chapter – 16
         stock purchase warrants, calls and puts options, options trading
         MERGERS, LBOS, DIVESTITURES, AND BUSINESS FAUILURE
         Merger Fundamentals, Leveraged buyouts (LBOs) and divestitures, stock swap                                 Chapter – 17
         transactions, INTERNATIONAL MANAGERIAL FINANCE Financial operations of                                          &
13
         MNCs, Domestic and international financial statements, exchange rat risk and                               Chapters – 18
         political risk, Eurocurrency market in short term borrowing, trends in international
         mergers and JVs.
                                 END TERM EXAM


Evaluation Plan (Marks in %age):
                                                                                                                      Total
Assign./Quizzes          Class Participation      Presentation   Final Project        Mid Term          End Term
                                                                                                                      Marks

         10%                      5%                  10%              -                  35%                 40%      100%


Recommended Text Books:

 Sr. No.                      Book Name and Edition No.                           Author(s), Publisher and Year of
                                                                                            Publication
     1         Principles Managerial Accounting                            Lawrence J. Gitman, 11th edition
     2         Fundamentals of Financial Management                        James C. Van Horne 11the edition, Pearson
     3         Fundamentals of Financial Management                        Stanley 11th edition.
     4         Principles Managerial Accounting                            Robert Singer 10th edition

Supplementary Books:

 Sr. No.                      Book Name and Edition No.                           Author(s), Publisher and Year of
                                                                                            Publication
     1         Introduction of Financial Management                        Iqbal Mather 10th edition

     2         Essentials on managerial finance                            J. Fred Weston & Holt Sauders

     3         Financial Decision Making                                   R.M. Srivasytava Sterling Publisher

				
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