Financial Management

Concept and scope of financial management; Financial management decisions; Financial manager’s responsibility; Forms of organizations; The agency problem; Business ethics and social responsibility; Financial innovations

Concept of financial planning and forecasting; Strategic plan; Operating plan; Financial plan, Sales forecast; The additional fund needed formula; Excess capital adjustments; Forecasted financial statement: forecasted income statement and balance sheet; Using regression to improve forecast

Concept of capital budgeting decision; Capital budgeting decision process; Types of
capital budgeting projects; Estimation of cash flows, Capital budgeting decision
techniques: payback period, discounted payback period, net present value, profitability
index, internal rate of return, modified internal rate of return; merits and limitations of
each capital budgeting decision technique, Replacement decision; Evaluation of projects
with unequal lives

Concept and measurement of return and risk, Measurement of rate of return: expected and average rate of return; Measurement of risk: variance, standard deviation and coefficient of variations: Measurement of risk and return in portfolio context; Risk diversification; Minimum variance portfolio; Efficient portfolio; Optimal portfolio; Capital assets pricing model (CAPM)

Concept of capital structure; Capital structure issues; Estimating the optimal capital structure; Factors affecting capital structure; Business risk and financial risk; Leverage: operating and financial leverage; Degree of operating and financial leverage; Combining operating and financial leverage, Impact of financial leverage; Indifference charts; Breakeven analysis: operating, cash and financial BEP

Concept of current assets management. Cash management: significance of cash management, motives of holding cash, importance of maintaining adequate cash; Inventory management: significance of inventory management, objectives of holding inventories, inventory management techniques, inventory control system; Receivable management: significance of receivable management, cost of maintain receivables, elements of credit policy, evaluating proposed changes in credit policy

Nature and types of dividend policy, Dividend versus capital gain; Dividend irrelevance theory; Bird in the hand theory; Tax preference theory; Factors affecting dividend policy; Stock dividends and stock splits: stock split, stock dividend, effect on stock price, Stock repurchase

Nature of multinational corporations; Reasons for companies going global; Multinational versus domestic financial management; Exchange rates quotations; Cross rates; Interbank foreign currency quotations; Trading in foreign exchange rates: spot rates and forward rates; Interest rate parity; Purchasing power parity