FM-R08

FM-R08
(PGDM-RM 2008-10 : Term-III)

Financial Management
(Facilitator: Prof. Shridhar Dash)
Email: shridhar@ximb.ac.in

COURSE OUTLINE

Introduction

Financial management course is designed to familiarize students with the basic tools and concepts of Finance, and to enable students to acquire knowledge about the techniques of long-term financial planning and other financial decision making.

The course would attempt to apply the theoretical concept to real life problems of finance managers. Financial Management topics will include the time value of money, the valuation of risk-free and risky assets, cost of capital, corporate investment decision making, capital structure decisions, working capital management, and sources of funds.

Evaluation
The following table is self-explanatory.

Components	Weights (%)
Surprise Quizzes (about 5 surprise quizzes)	50%
Class Participation	10%
End Term	40%

Class participation would be judged by attendance, behavior inside the class and thought provoking questions that are being asked in the class.

Reference Books

1. Financial Management by Prasanna Chandra, TMH
2. Fundamentals of Corporate Finance by Ross, Westerfield, and Jordan; 8th Edition (Alternate); ISBN: 978-0-07-328211-4; Copyright Year: 2008
3. Principles of Corporate Finance by Richard A Brealey, Stewart C. Mayers, Franklin Allen, and Pitabas Mohanty, Tata McGraw-Hill (TMH), 2007

Session wise reading material would be discussed in class.

Session 1: Introduction to financial management
In this session we will discuss the objective of a firm, concept of shareholders value, role of finance manager in an organization, and how this course is going to help in financial decision making process for an organization.

Session 2 – 4: Time value of money: Learning the tools that is required to make the decisions
In this session we will study the importance time in valuing money and how the concept is used to calculate the present and future value of money. Role of compounding and the calculation of effective rate of return will be discussed in detail. Calculation of annuity and its applications will be studied.

Session 5-6: Discounted cash-flow and valuation of assets: Getting the right inputs for the decisions
In this session we will study various types of bonds, explain various terminologies. Basic valuation of the model will be explained. Besides basic concept of yield curve will be discussed along with the term-structure of interest rate. Attempt would be made to link the valuation of bond with the yield curve.

Similarly equity valuation will be studied with help of Dividend Discount Model and Discounted Cash Flow model.

Most importantly the role of discount rate and what is the appropriate discount rate one should use to value asset would be discussed in detail.

Session 7-8: Cost of capital: Getting the right inputs for the decisions
In these sessions we would study the concepts of capital and cost associated with various types of capital. Concept of risk and return would be discussed with in the context of Capital Asset Pricing Model (CAPM) and the application of the same in calculating the cost of capital. Weighted average cost of capital would be studied in detail and its applications will be discussed.

Session 9-11: Capital Budgeting: The investing decisions
In this session we will discuss the various types of capital budgeting methods, and critically evaluated them to understand the implication of using them for capital allocation to various competing projects. Besides we would study various scenario analysis and sensitivity analysis to understand the risk associated with the investment decisions.

Session 12: Dividend policy: The sharing of surplus decision
In these sessions, we will study the firm’s decision about how much cash from the profit to distribute to the shareholders of the firm. Does pay-out policy makes a difference to the valuation of firm? We would study the Modigliani & Miler (MM) theorem and try to understand the implications for the pay-out decisions for a firm. How is pay-out different form stock purchase and what would be appropriate thing to do under what conditions would be studied.

Session 13-14: Capital Structure: The long-term financing decisions
In these sessions, we will study the importance of structure of firm with respect to how the firm finances their investment. We would study the Modigliani & Miler (MM) Theorem and its implications for capital structure. How the imperfections in the market needs to be understood in the context of MM theorem so that we can explain the differences in capital structure across industries.

Session 15-16: Working capital management: The Short-term financing decisions
In these sessions, we will study the importance of working capital, and how one can estimate the requirement of working capital. Given that more working capital is drag on the profitability, how can a finance manger reduce the working capital requirement.

Session 17-18: Source of funds: Knowing the facts for decisions
In these sessions, we will study the role of financial institutions to meet the financial need of the firm. What are source of long-term and short-term fund? The source of the fund would be discussed in the context of the Indian financial system. Besides we would discuss the positive and negative aspect of various sources and under what condition which source would be most appropriate for the firms.

Session 19-20: Introduction to Indian financial system: Knowing the facts for decisions
In these sessions, we will study the Indian financial institutions. The institutions that we will study are commercial banks, investment banks, mutual funds, stock market, debt market, rating agencies, and regulators. Role of each of these institutions would be discussed in the context of how a financial manager interacts with each of these institutions to do his day-to-day job.
Created By: Bijoy Kar on 01/06/2009 at 05:07 PM
Category: PGPRM - I Doctype: Document

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