BBA Program

Introduction to financial management

(Spring 2020)

Prof. Shobhit Matthew Jose/Prof. Priyesh.V.Purayil/Prof.Udayan Sharma

smjose@jgu.edu.in /Priyesh V.purayil@jgu.edu.in/

INTRODUCTION TO THE COURSE

In current scenario, managers play a dynamic role in modern corporate world. Increased corporate
competition, volatility in stock market, increase in inflation and interest rates, changes in legal
environment, including tax laws & ethical concerns and technological changes, have impact on
various financial decisions in day to day life. As a result, Corporate Finance has acquired more
vital strategic role in today’s world. This subject is designed to impart required knowledge and
equip students with all important techniques and tools to take real world decisions.

COURSE OBJECTIVES

• The objective of the course is to provide a thorough understanding about the process and
system of Financial Management in an organization, its necessity, structure, goals and
scope.
• To gain insights for financing decisions and to make students aware of the various long-
term and short-term sources of finance along with concept of value and return, valuation of
Bonds and Shares, risk and return, cost of capital and Financial & operating leverage
LEARNING GOALS

In addition to the specific course related objectives, this course is designed to achieve the
following learning goals

1. Critical and Integrative thinking: Each student will be able to identify key issues in
Corporate Finance and Financial Management in management settings, develop a
perspective that is supported with relevant information and integrative thinking, to draw
and assess conclusions. This learning goal will be measured through assignments and
submissions

Awareness of Global Issues affecting Corporate Finance Decisions: Each student will be able to
identify key relevant global issues and be able to analyze the impact of the global environment on
Financial Management, as compared with domestic market related management issues. This
learning goal will be assessed through class discussion, cases and exercises. Special Emphasis will
be given to help the students to develop analytical ability to analyze corporate decisions. This will
be done with the help of practical exercises. Case and Exercises will be announced separately.

2. Interpersonal Awareness and Working in Teams: Each student shall demonstrate an ability
to work effectively in a team, exhibiting behavior that reflects an understanding of the
importance of individual roles and tasks and the ability to manage conflict and
compromise so that team goals are achieved.
3. Effective Presentation Skill: Each student shall be able to communicate verbally in an
organized, clear, persuasive manner and be a responsive listener.

PEDAGOGY

A mix of instructional methods will be used like lectures, discussions exercises and assignments.
The efforts would be made to strengthen the conceptual knowledge and application through cases
and exercises. The emphasis of this course is on both intellectual stimulation and practical
rigorous applications, through the security analysis project. The course emphasis is on the
development of both quantitative analytic skills and presentation skills.
ATTENDANCE POLICY

Attendance to all the sessions is as per the university rules (minimum 75% excluding all leaves).
The following instances will also be treated as absence unless prior permission is sought.

• Attending only part of the session, either entering or leaving during the break
• Arriving in class after the session is scheduled to begin

GRADING

The course grade will be determined on the basis of

Evaluation Component Weightage Nature
Group Project 10% Group
Class participation 10% Individual
Mid-term Examination 20% Individual
Quiz 10% Individual
End Term Examination 50% Individual
All assignments submitted are screened for plagiarism and would be penalized appropriately.
Suggested Readings:

Textbook: Pandey I. M. - Financial Management (10th Edition, 2011, Vikas Publishing) [ IMP]

Reference Readings

▪ Prasanna Chandra- Fundamentals of Financial Management 8th Edition, 2011, (TMH,) [PC]
▪ Van Horne, James C., & Wachowicz Jr,. John M. Fundamental of Financial Management,
(13th Edition), Prentice Hall of India
▪ Parrino Robert, Kidwell David, Fundamentals of Corporate Finance, Wiley India Ed. 2011
▪ Khan M Y and Jain P K, Financial Management 6e, McGraw Hill

SESSION PLAN

Session No. 1 Introduction to Financial Management

Objective of the After the successful completion of this session, students should be able to
sessions understand:
• Concept of finance
• Goals of firm
• Corporate Governance
• Functions of Finance Manager in Modern Age
 • Agency Problem
Readings IMP Ch 1 and VH Ch 1

Session No. 2-4 Time Value of money

Objective of the After the successful completion of this session, students should be able to
sessions understand:
Concept of Value and Return
Time value of money
Future Value
Present Value
Annuity
Capital Recovery
Growing Annuity
Multi-period Compounding
Readings IMP Ch 2, VH Ch and 3 PC Ch 6
Session No 5-8 Introduction to Valuation
Objective of the After the successful completion of this session, students should be able to
sessions understand:

• Valuation of Securities-Shares and Bonds

Readings IMP Ch 3 and PC Ch 7

Session No 9- Risk and Return

11
Objective of the After the successful completion of this session, students should be able to
sessions understand:
Risk and Return
Risk of Rates of Return
Variance & Standard Deviation
portfolio variance and standard deviation
CML and SML
Readings IMP Ch 4 and PC Ch 8
Session No 12- Capital Budgeting
15
Objective of the After the successful completion of this session, students should be able to
sessions understand:
• The capital budgeting process and its relevance in a business
organization.
• How to estimate the cost & benefit of a business project.
 • The estimation of expected return from a project using ARR.
• The payback period method for the estimation of time period
required to recover the cost of investment.
• How to apply NPV method by taking into consideration both cash
flows from a project & time value of money.
• The practical use of profitability Index for project evaluation.
• The practical use of IRR Method for project evaluation.
Readings IMP Ch 8 and PC Ch 15
Session No 17- Capital Structure
20
Objective of the After the successful completion of this session, students should be able to
sessions understand:
• The concept of capital structure & financial structure.
• The various factors determining capital structure.
• NI & NOI approach in determining capital structure
• Traditional Method and M&M approach.
• M.M Hypothesis with corporate tax.
practical Overview on Arbitrage process.

Readings IMP CH 15
Session No 21- Operating and Financial Leverage
22
Objective of the After the successful completion of this session, students should be able to
sessions understand:
• The concept of leverage and to understand the significance of
leverage analysis
• The computation of operating leverage and Financial Leverage for
Business decision making.
Readings IMP CH 14
Session No 23-24 Long-term Sources of Finance
Objective of the After the successful completion of this session, students should be able to
sessions understand:
Equity Shares as a long-term source of Finance
Preference Shares, Debentures and Bonds as a long-term funding source
Readings IMP Ch 20 and PC Ch 17
Session No 25-27 Dividend Decisions
Objective of the After the successful completion of this session, students should be able to
sessions understand:
 • Dividend theory and practice
• Walter, Gordon and Modigliani models
Readings IMP, chap 17
Session No 28- Working capital management
30
Objective of the After the successful completion of this session, students should be able to
sessions understand:
• The objectives of cash management.
• The specific techniques for speeding up of cash inflows
• The specific techniques for slowing cash disbursements.
• The concept of float management
Readings IMP Ch 31 & 28 and PC Ch 27
Note-Session 16-Midterm Examination, Quizzes will be conducted in between the sessions.