FINANCIAL MANAGEMENT (FN-550)
Program Credit Hours Duration Prerequisites Resource Person Class timings Web address Class e-mail
MBA(P) 3 15 Weeks/30 sessions All accounting courses
M. Mahmood Shah Khan
Course Introduction
Learning financial management is about constructing a conceptual framework and changing your views to build understanding. This course provides a foundation to help you understand deeper issues and to develop expertise. A variety of learning materials and opportunities to practice basic concepts underlie the design of this course. You are encouraged to discover, collaborate and regulate learning at your own pace from multiple sources of information provided. This course will encourage you to think critically about issues in financial management. A mixture of individual and collaborative work will help you to take advantage of peer expertise and produce feedback opportunities that would not be possible otherwise.
Learning Objectives
By the end of this course you should be able to realize: That a working knowledge of finance is important even if you are not planning a career in finance. Besides wanting to pass this course, why do you need to understand finance. How should a business organization manage its everyday financial activities? Understand the difference between accounting profits and cash flows. The value of money versus time (the concept of time value of money). The role of interest rate on the economy. The role of interest on Value (example: your savings and loans). An overview of the Capital Budgeting process and techniques. Apply and evaluate financial information in a simulated case setting. Increase your confidence to participate in financial decision making.
Pedagogy
The course employs cases and problems as well as classroom lectures and discussions to offer a hands-on learning experience. We will make use of international as well as domestic examples. Regularity and Punctuality: Regularity and punctuality will be very strictly observed. You have an allowance of number of absences as per UMT policy. This includes the leaves that are approved from your Batch Advisor. Regarding punctuality, you will be marked present only if you arrive in the class within five minutes of the scheduled time. Absence during the presentation sessions will result in deduction of 1 point each from the class participation marks. This means that the class participation marks can go into the negative as well. If your group is making a presentation and you are not there, you get zero. If you miss a Quiz you get zero in that Quiz. You will lose 5 points if you deliver your assignment / report after the given date. Book Readings: You are supposed to have read the text chapters under discussion in advance. Questions answered, relating to these text chapters, will contribute to the class participation marks. Class Participation: Positive, healthy and constructive class participation will be monitored for each class. Particular emphasis will be given during the presentation and case study sessions. The manner in which the question is asked or answered will also be noted. Your behaviour, as business executives in the class will contribute to the class participation marks. Advisory Service: During the semester, you are free to discuss the progress of your course any time you want. However to avoid inconvenience setting up of appointment is recommended.
Assessments
All of the activities held during the session will be evaluated. The final grades for the course will be as follows: Quizzes Assignment Project/Case Study Mid-Term Final exam Total Quizzes/Class Participation: 10% 10% 30% 20% 30% 100%
Quizzes will be taken according to calendar of activities. The quizzes are aimed at evaluating the participants understanding and clarity of different concepts. Some corrective action will be taken if necessary, to fill the gap between desired and actual. Surprise quizzes may also be taken. Quizzes may be either subjective or objective. Assignments/Project: Assignments are evaluated on the basis of the material, expression, graphical representation (if required), and list of references. Plagiarism is not allowed. Late submission of assignments will not be accepted in any case. Assignments will be returned after grading the next week. At the end of the course, the participants are required to submit a project. The purpose of the project is to enable the participants fully apply the knowledge acquired during the course. It will come up with more clear understanding of what is going on in practical life. RECOMMENDED TEXT BOOK: Course Pack REFERENCE BOOKS: 1. Fundamentals of Financial Management, Brigham & Houston (Concise 5e) 2. Fundamentals of Corporate Finance by Brealey, Myers, Marcus (5e) Corporate Finance by Ross, Westerfield, and Jordan (8e)
3.
CALENDAR
OF
ACTIVITIES
Session
TOPIC
AN OVERVIEW OF FINANCIAL MANAGEMENT FINANCIAL STATEMENTS, CASH FLOWS & TAXES. ANALYSIS OF FINANCIAL STATEMENTS
Discussion Topics
Introduction to Financial Management Modifying Accounting data for Managerial Decisions Calculation of NOWC, NCF, NOPT, OCF, MVA, EVA, ETC. Liquidity ratios. Asset Management ratios. Debt Management ratios. Profitability ratios. Market Value ratios. Du Pont Equation Type of Markets & financial institution. Cost of Money, Interest rate levels Determinants of market in interest rates. Term structure of interest rates, Yield Curve expectations theory to estimates future interest rates. Other factors that influence interest rate levels. Investment returns, expected rate of return Stand alone risk: standard deviation & CV Risk aversion and required returns Portfolio risk: Diversifiable vs Market. Security Market Line and CAMP. Time lines, Future Value, Present Value. Present Value and Future Value of Ordinary Annuities. Perpetuities Uneven cash flow streams, different compounding periods, Fractional time periods, Effective interest. Loan Amortization. MID TERM Characteristics of Bonds with call provisions and sinking funds and other features. Bond valuation & bond markets. Bond Yields: yields to maturity, yield to call current yield, capital gains yield. Type of common Stock, common stock markets and transaction. Stock Valuation Models: constant growth Gordon model, supernormal growth stock valuation, corporate value model. Stock market equilibrium. Efficient market hypothesis. Cost of Debt. Retained Earning: CAMP approach, Discounted approach. Cost of New Common Stock. Adjusting WACC for risk. Importance of Capital budgeting. Capital budgeting decision rules. Payable period, NPV, IRR, MIRR,NPV vs IRR
Suggested Problems 3-10, 3-11, 312, 3-13, 3-14, 3-15, 3-16 4-10, 4-13, 414, 4-15, 4-16, 4-17, 4-19,421, 4-22, 4-23, 4-24, 4-25
Suggested Readings CHAPTER1& 3
1,2
3,4
CHAPTER 4 CASE - 1 QUIZ - 1
INSTITUTIONS AND INTEREST RATES
THE FINANCIAL ENVIRONMENT: MARKETS,
6-1, 6-13, 6-14, 6-18, 6-19
CHAPTER 5,6 ASSIGNMENT 1
6,7
RISK
AND
RETURN
RATES
OF
8-6, 8-7, 8-8, 8-9, 8-10, 812, 8-13, 8-15, 8-18, 8-20, 821, 8-22
CHAPTER 8 CASE 2 QUIZ 2
8,9
TIME VALUE MONEY
OF
2-18, 2-19, 220, 2-22, 2-23, 2-25, 2-31, 233, 2-34, 2-35, 2-38, 2-39, 240, 2-41
CHAPTER 2 CASE - 3 QUIZ 3 ASSIGNMENT 2
10,11
BONDS AND THEIR VALUATION
7-5, 7-7, 7-8, 7-9, 7-10, 712, 7-13, 7-14, 7-15, 7-19, 721
CHAPTER 7 ASSIGNMENT 3
11,12
STOCKS AND THEIR VALUATION
9-7, 9-8, 9-9, 9-10, 9-12, 913, 9--14, 916, 9-18, 9-19, 9-22
CHAPTER 9 CASE - 4 QUIZ 4
13
Weighted Average Cost of Capital (WACC) THE BASICS OF CAPITAL BUDGETING
10-8, 10-9, 1010, 10-11, 1013, 10-14, 1020, 10-21
CHAPTER 10 CASE - 5 QUIZ - 5 ASSIGNMENT 4
14,15
11-7, 11-10, CHAPTER 11 11-11, 11-15, CASE - 6 11-16, 11-17, QUIZ 6 11-18, 11-19, 11-20, 11-23
