Masters of Business Administration

[Financial Strategy and Policy]

Subject Outline

Course code: [FIN 561]

Subject details

Financial Strategy and PolicyPage 1

 Subject Code: FIN 561

Subject Credit Points: 3

Course Level: Advance

Associated courses: Finance for Managers

Pre requisites and presumed knowledge

Financial strategy and policy is regarded as an unprecedented and pivotal edifice of finance.
This course is meticulously designed for post-graduate business administration students to
cater to the demands and requirements of today’s world. The students who are keen to study
this course must have a strong conceptual and functional knowledge of the rudimentary
elements of finance.

Synopsis
The cardinal reason of the existence of every business is to maximize its wealth. One of the key
tools to attain this task is the mastery over the conceptual and functional aspects of finance.
This course induces financial theories, a few advanced financial topics and internalizes them
with the practices prevailing in the real world. The subject broadens the financial horizon of the
students and makes them able become sagacious entrepreneurs.

Subject rationale
A sound understanding of the subject will bring a sea-change in the life of the students. In
addition, it imbues them a life-changing experience which, in turn, will add value in their profile.
After studying this course, the students will be enough capable of deriving the intrinsic and
extrinsic value of the firm. The students studying this course will surpass financial planning,
execution, evaluation, and restructuring in an unprecedented way which will leave infallible
footprints for the generations to learn and glean further.

Study load
According to Higher Education Commission and aligned with the volume of learning
requirements 45 hours of study require to be completed this course. It may include class
lecture, online videos, power point slides, discussion-format; group learning activities are
strongly encouraged. Students are expected to ask for assistance through office hours.
Assignments, quizzes, exams and the final project relate the knowledge of finance and concepts
to real practical problems and cases.

Financial Strategy and PolicyPage 2

Course Objectives
Develop an understanding of how to formulate a financial strategy taking account of a
CO1
range of stakeholders and their interests and differing financing options
Identify and critique a range of investment appraisal techniques, select as appropriate
CO2 and apply within the investment appraisal process, and make a justifiable
recommendation
Understand the implication of differing types of capital structure and their implications
CO3
for cost of capital and associated decisions
Understand and critique both the theoretical issues and influences on practical
CO4
decisions associated with the development of dividend policy
To understand and analyze different working capital and cash management policies a
CO5 business can adopt

Financial Strategy and PolicyPage 3

Learning outcomes
This table lists the learning outcomes (LOs) for the subject.

IU’s Subject LO categories On completion of this subject IU Graduate Qualities

participants should be able to:

Knowledge LOs LO1: A sound understanding of ● Critical Thinking

the derivation of strategies and
● Decision Making
policy-making.

Comprehension LOs LO2: A wide understanding of ● Managerial Skills

financial theories and their
implication in the real world.

Application LOs LO3: A prudent comprehension of ● Managerial Skills

devising financial modeling
● Technical Skills
catering to the need of the
modern-financial era.

Analysis LOs LO4: Demonstration of splendid ● Decision Making

financial engineering to enhance
corporate valuation and to
eliminate financial impediments.

Synthesis LOs LO5: Transforming financial ● Entrepreneurial

practices from conventional Skills
mechanism to advanced financial
● Critical Thinking
modeling based on innovative
information technology.

Financial Strategy and PolicyPage 4

Financial Strategy and PolicyPage 5
Content
Week # 1: Introduction to Financial Management
1 Unit Topic
Unit 1.1 Overview of financial markets
Unit 1.2 The concept of time value of money
Unit 1.3 The concept of calculating present value
Unit 1.4 The concept of calculating future value
Unit 1.5 The concept or stock valuation
Unit 1.6 The concept of bond valuation

Week # 2: Risk and Return

2 Unit Topic
Unit 2.1 The concept of risk and return in finance
Unit 2.2 Stand-alone risk and return
Unit 2.3 Portfolio return
Unit 2.4 Correlation
Unit 2.5 Portfolio risk

Week # 3: Risk and Return

5 Unit Topic
Unit 3.1 The concept of beta and its calculation
Unit 3.2 CAPM model
Unit 3.3 SML line
Unit 3.4 Efficient Portfolios
Unit 3.5 Indiffernece curves
Unit 3.6 CML line

Week # 4: Financial Planning

4 Unit Topic
Unit 4.1 Introduction to financial planning
Unit 4.2 How does firm generate cash flows?
Unit 4.3 Cash flow analysis
Unit 4.4 Financial forecasting
Unit 4.5 Cash budget

Week # 5: Leverage Policy

5 Unit Topic
Unit 5.1 The optimal capital structure
Unit 5.2 Business & Financial Risk
Unit 5.3 MM Propositions
Financial Strategy and PolicyPage 6
 Unit 5.4 Trade-off Theory
Unit 5.5 Pecking Order Theory and Signaling Theory

Week # 6: Dividend Policy

6 Unit Topic
Unit 6.1 Intrdocution to Dividend policy
Unit 6.2 MM Dividend Irrelevance Theory
Unit 6.3 Bird in the hand fallacy & tax preference theory
Unit 6.4 Signaling Theory & Clientele Effects
Unit 6.5 Reisdual Dividend Model

Week # 7: Cost of Capital

7 Unit Topic
Unit 7.1 What goes into calculating a firm’s cost of capital?
Unit 7.2 Weighted Average Cost of Capital
Unit 7.3 Cost of debt
Unit 7.3 Cost of preferred Equity

Week # 8: Cost of Capital

8 Unit Topic
Unit 8.1 Components of cost of capital: Cost of Equity stock
Unit 8.2 Three ways to calculate cost of equity capital
Unit 8.3 Cost of retained earnings Vs cost of issuing new equity
Unit 8.4 Determining the weights for the WACC

Week # 9: Capital Budgeting

9 Unit Topic
Unit 9.1 The concept of capital budgeting in finance
Unit 9.2 Payback period
Unit 9.3 Discounted payback period
Unit 9.4 Net Present Value

Week # 10: Capital Budgeting

10 Unit Topic
Unit 10.1 Profitability Index
Unit 10.2 Internal Rate of Return
Unit 10.3 Conflict between NPV and IRR
Unit 10.4 Modified Internal rate of return
Financial Strategy and PolicyPage 7
 Week # 11: Corporate Valuation
11 Unit Topic
Unit 11.1 Intrisnic value
Unit 11.2 Two Types of Assets
Unit 11.3 Total Corporate Value
Unit 11.4 Applying the Corporate Valuation Model

Week # 12: Corporate valuation

12 Unit Topic
Unit 12.1 Value Based management
Unit 12.2 Insights form constant growth model
Unit 12.3 Expected Rerun on invested capital
Unit 12.4 Corporate governance

Week # 13: Working Capital Management

13 Unit Topic
Unit 13.1 The concept of working capital management
Unit 13.2 Cash Conversion Cycle

Week # 14: Working Capital Managemet

14 Unit Topic
Unit 14.1 The importance of cash budget
Unit 14.2 working capital issues
Unit 14.3 working capiral financial policies

Resources

Recommended Book:
Financial Management: Theory and Practice by Eugene F. Brigham & Michael C. Ehrhardt, 14 th
Edition (2016).

Financial Management and Policy by James C. Van Horne, 12th edition (2014)

Reference Books (Optional Sources)

Financial Strategy and PolicyPage 8

Mini as well as comprehensive case studies on different topics (to be provided by the teacher).
In addition, recent research paper related to the topics mentioned-above in the outline will
intermittently be provided for the exponential expansion of the student’s knowledge.

Videos

Introduction of Finance videos https://www.youtube.com/watch?v=uUPpE_R5IvI

Risk and Returns videos https://www.youtube.com/watch?v=3BIIiUyr3-w
Dividend Policy videos https://www.youtube.com/watch?v=kky-S5s5ymg

Financial Strategy and PolicyPage 9

Assessment

Assessment Brief Weightage Due date Related learning

Description outcomes

Quizzes Multiple choice 30% As per the LO1, LO2, LO3

questions with discretion of the
immediate course
feedback on VLE instructor—at
(n-1) least three
quizzes need to
be taken (n-1)

Mini-Project Comprehensive 30% As per the LO1, LO2, LO3,

Questions from discretion of the LO4
Part a)
each of chapters course
LO5
Part b) instructor—at
least three
assignments
need to be
taken.

Final Exam Take Home Final 40% Please refer to LO1-LO5

Exam your timetable

Exam

There is a take home written exam at the end of this subject. Iqra’s exams are designed in such
a way that all questions are compulsory and there is no element of choice. Remember to always
read the instructions carefully before starting the exam.
All students, unless otherwise stated, must sit in their exams halls till completion of the time.

Academic integrity: avoiding plagiarism, collusion and other issues

It is important to adhere to high standards of academic integrity. Academic integrity refers to

ethical, honest and responsible conduct in writing and reporting. Breaches of academic integrity
include:

Financial Strategy and PolicyPage 10

• Plagiarism – submitting another person’s words or ideas as your own without appropriate
acknowledgement and referencing.

• Collusion – submitting work as if it is one’s own when in reality it has been completed with
others, including assisting or being assisted by another; receiving or giving assignment details to
another; or publishing one’s work.

• Contract writing (Ghost Writing) – submitting work that has been contracted out to others to
complete on one’s behalf. This is a form of collusion.

• Fabrication – submitting work with results or data that do not exist and that have been made
up.

• Double submission – submitting substantially the same piece of work for more than one
subject unless agreed upon with the facilitators of the different subjects

Please note that IU checks assignments for plagiarism (using advanced text-matching software)
and for other academic misconduct. IU penalizes work and/or people found to have been in
breach of academic integrity.

Background information

Learning materials

All of your materials and activities are provided online and are designed to lead you through the
learning process for this subject.

Contact information

Dr Aitzaz Ahsan Alias Sarang

Email: aitzaz.sarang@iqra.edu.pk
Dr. Asad Ali Rind
Email: asadrind@iqra.edu.pk

Financial Strategy and PolicyPage 11

Student feedback on subject

As part of our commitment at IU to improve the quality of our courses and teaching, we
regularly seek feedback on your learning experiences. Student feedback informs evaluation of
subject and teaching strengths and areas that may need refinement or change. Your Iqra end of
Subject Survey is a formal and confidential method for you to provide feedback about your
subjects and the staff members teaching within them. You will get an option to give feedback
on IULMS. We value your feedback and ask that you to provide considered feedback for each of
your subjects.

Financial Strategy and PolicyPage 12