Course Handout

Financial Management-I
BBA - Semester III

Instructor: Dr. S K Jena Total No. of Sessions: 48

Office: F-114 (Finance Wing - First Floor) Sessions per Week: 3
E-Mail: skjena@ibsindia.org Contact No.: +91 8826568572

Area: FINANCE
Sub-Area: FINANCE
Section: A
Course Title: FINANCIAL MANAGEMENT-I
Section Course Objectives
 To introduce finance and financial management and the 
financial environment in which financial decision
making takes place
 To understand the functioning of the Indian financial 
system and the various markets that comprise the
financial system
 To understand the concept and importance of time value 
of money for finance decision making
Course Objectives  To understand the concept of risk and return and the 
association between them
 To develop the awareness of the various sources of
finance and evaluate the cost of fund raising  Demonstrate an understanding of intricacies involved
 To understand the principles of cost and benefits and
assess investment possibilities  Demonstrate an understanding of the nature and
Learning Outcomes
Demonstrate an understanding of the working of Indian
financial system, its various components and their
interaction with organizations
Identify the relationship between risk and return and
how the level of risk can be affected by financing
decisions
Demonstrate an understanding of the various sources of
finance and risk and returns associated with each
Demonstrate an understanding of the theories of capital
structure, concept of leverage and evaluate the cost of
raising capital
in valuing securities
repercussion of an investment decision

Page 1 of 5
Sl. No Topics Teaching Objective Learning Outcome Chapter
Reading
1. To explain students: Students will learn :
 To list down the important areas of
 What is financial management? financial manage,emt
 Functions and Scope of financial management  Why understanding of financial
Introduction to CH-1
 The importance of financial management and its management is crucial for a
Financial manager to run a business?
influence on firm performance
Management .0
 Interface of Financial Management with Other  Major objective of financial
(Total 3 sessions) Page No: 2
Functional Areas management subject
 Types of decisions considered under financial  Understanding of environment
management of Corporate Finance and role
of financial management
2.  Discuss the Functions and Classifications of Financial  Understanding of Indian financial
Markets systems
 Characteristics of Indian Financial Systems and various  Types of markets and instruments
Indian Financial reforms available in these markets
System and over view  Types of market Participants and Institutions  Why financial system is crucial for CH-3
of financial markets  Discuss types of Instruments - Regulatory Authorities economic growth? Page No: 44
(Total 5 sessions) in each market  Understand functioning of markets
 Discuss various markets- Money Market, Forex Market  Understanding of impact of
and bond Market different reforms in Indian market

3.  To Introduce concept of time value of money  What is time value of money

 Discuss the applicability of this concept in different (TVM) and its importance?
domains  Areas where TVM method can be
 Understand Types of Cash flows – Future Value of a used to compute the value of
Time Value of Money Single Cash Flow, sunk cost investment CH- 4
(Total 6 sessions)  Discuss Multiple Flows and Annuity  To understand the role of time Page No: 68
 Discuss Present Value of a Single Cash flow, Multiple  Understanding of installment and
Flows and Annuity loan amortization schedule
 Estimation of Growing Annuity, Perpetuity and  Understanding of future value and
Growing Perpetuity present value of investments
4. Investment Risk and  Introduction to Risk and Return Concepts  Understanding of importance of CH-8
Page 2 of 5
 Return  factors affecting return of an asset, risk and return Page No:
(Total 5 sessions)  Risk in a Portfolio Context  How to maximize return using 168
 Trade-off between risk and return combinations of assets in
 Relationship Between Risk and Return portfolio?
 Estimation of risk and return for a
portfolio
5.  Introduction to Long term Financing  Understanding of importance of
 Sources of finance- Shares – Debentures – Term financing for a firm
Loans  How a source of finance should be
 Importance of Lease – Hire Purchases as sources selected?
Sources of Finance Class
of finance  Understanding of lease and hire
( Total 3 sessions) Discussion
 Discuss the Project Financing and Venture Capital purchase
Financing  Understanding of different
instruments available to finance
firm’s investment activities.
6.  Use of key information to compute
various leverage ratios
 Introduction: Concept of Leverage
 Importance of leverage ratio for a CH-12
Leverage  Discuss the types of leverage
manager Page No:
(Total 3 sessions)  Estimation of various types of leverages: Operating 300
 Application and interpretation of
Leverage, Financial Leverage, and Total Leverage
leverage ratios

7.  Introduction to Capital Structure  Explain the importance of the

 Discuss the Factors affecting Capital Structure , capital structure
Capital Structure  Discuss the Features of an Optimal Capital Structure  Understanding of different theories CH-12
(4 sessions)  Discuss the theories of Capital Structure - Traditional of capital structure Page No: 286
Approach – Miller and Modigliani Approach – Rational  Understanding of optimal capital
Expectations Model structure for a firm.
8.  Introduce Concept of Valuation  Understand the methods of
 Discuss Bond and stock Valuation valuation for bond and stock
Valuation of Bonds CH-6&7
 Explain the methods of valuation in context of bond and  Understand the difference between
and Securities Page No: 120
stock bond and stock
(6 sessions) & 146
 Estimation of yield to maturity (YTM), current yield ,  Understanding of terms related to
and Yield to call (YTC) valuation like YTM, and YTC
Page 3 of 5
  How the maturity period of bonds
and stock influence the valuation?
9.  Introduction to Concept and its Importance  Understanding of various
 Discuss the instruments of financing associated with the instruments of
 Discuss estimation of Cost of debenture – Term loans – financing
Cost of Capital CH-11
Equity capital and retained earnings  Help students to select best option
(5sessions) Page No: 262
 Calculation of Weighted Average Cost of Capital of financing
(WACC)  Understanding of WACC and its
importance for a firm
10.  Introduction of capital budgeting  Understanding of importance of
 Discuss the Process of Capital Budgeting capital budgeting decisions
 Basic Principles in Estimating Cost and Benefits of  Why capital budgeting decision is
Investments complex?
Principles of Capital  Discuss methods of capital budgeting decision  Understanding of different
CH-9
Budgeting appraisal: Discounted and Non-Discounted Methods approaches that can be used to
Page No: 196
(8 Sessions) (Pay-Back Period – Average rate of return – Net Present decide the best project for
Value – Benefit Cost Ratio – Internal Rate of Return) investment
 Understanding of project appraisal
stages involved in capital
budgeting decisions
Prescribed Book: CFIN Corporate Finance, Besley, Brigham and Parasuraman, 1st Edition, Cengage
Reference Book: Financial Management, Prasanna Chandra,8th Edition,TMH (PC)
Other Book: Basic Financial Management, Khan and Jain,3rd Edition,TMH (KJ)
Required material : FX 991MS calculator (compulsory)

Page 4 of 5
SI No Component Weightage
st rd
1 Class Participation 1 (from 1 Session to 23 Session) 5%
2 Test 1 15%
3 Mid-Term Exam 20%
th th
4 Class Participation 2 (from 25 Session to 47 Session) 5%
5 Test 2 15%
7 End Term Exam 40%
8 Total 100%

Page 5 of 5