Fundamentals of Finance
bbasemester 3
Subject Code: FIN 206
Course Title: Fundamentals of Finance
Course No: FIN 206
Nature of Course: Theory & Practical
Full Marks: 100
Pass Marks: 50
Credit Hours: 3
Unit 1: Introduction to Finance 5 LHs
Concept of finance; Finance functions, The financial goal; Finance in organizational structure; Finance and related disciplines.
Unit 2: Financial Environment 4 LHs
Overview of financial environment; Financial instruments, Financial markets:Functions and types of financial markets; Financial institutions: Depository and non- depository financial institutions.
Unit 3: Analysis of Financial Statements 6 LHs
Financial statements and reports; Concept of financial statement analysis; Users offinancial analysis; Tools of financial statements analysis; Need of financial ratioanalysis; Types of financial ratios: liquidity ratios, asset management ratios debtmanagement ratios, profitability ratios and market value ratios; Du-Pont equation;Comparative ratios and benchmarking; Uses and limitations of ratio analysis.
Unit 4: Interest rates 6 LHs
The cost of money; Interest rates levels; Determinants of market interest rates; Termstructure of interest rates; Theories of term structure of interest rates; Shape of yieldcurve; Using the yield curve to estimate future interest rates; Macroeconomic factorsinfluencing interest rates; and Interest rate and business decision.
Unit 5: Time Value of Money 8 LHs
Concept of time value of money; Cash flow time line; Future values and presentvalues of a single cash flow; Computing the interest rate and the number of years;Future value and present value of an ordinary annuity and annuity due; Computingannuity payments, periods and interest rates; Present value of perpetuities; Presentvalue and future value of uneven cash flows; Semiannual and other compoundingperiods; Preparation of loan amortization schedule; Application of the concept oftime value of money.
Unit 6: Bond Valuation 5 LHs
Meaning and key characteristics of bonds, Basic financial asset valuation model,Valuation of bonds: perpetual bonds, zero coupon bonds, coupon bonds with finitematurity, Bonds with semiannual coupons, required return and bond values, Changesin bond values over time, Bond yields: current yield, capital gain yield, yield to maturity and yield to call.
Unit 7: Stock Valuation 5 LHs
Meaning and key features of common stock, Common stock valuation: single andmultiple holding periods, The dividend discount model: zero growth model, normalgrowth model, non-constant growth model, valuing the entire firm, Preferred stock: Features and valuation.
Unit 8: Cost of capital 5 LHs
Concepts and uses of cost of capital, Components of cost of capital: cost of debt, cost of preferred stock, cost of retained earnings, cost of new common stock, weightedaverage cost of capital; Factors affecting cost of capital.
Unit 9: Working Capital 4 LHs
Concepts of working capital; Types of working capital; Factors affecting the size ofworking capital; Working capital management and its significance; Operating cycle, cash conversion cycle and computing the amount of working capital requirement.
Brigham, E. F. & Houston, J. F. Fundamentals of financial management. Delhi: Cengage
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Ross, S. A., Westerfield, R. W. & Jordan, B. D. Fundamentals of corporate finance. New York:
McGraw-Hill Irwin.
Van Horne, J. C., Wachowicz, J. R. & Bhaduri, S. N. Fundamentals of financial
management. New Delhi: Prentice-Hall India Ltd