IBS Hyderabad (Academic Year – 2021-22)

Course Handout
Course Code : SLFI502
Course Title : Financial Management - II Semester: II
Faculty Name : Dr. Satish Kumar Room No: F–106
Consultation Hours (Day/time):
Mobile No: 9951707097 Email: satishwar@ibsindia.org
Course Description:
The course would add to the conceptual knowledge of the students through the discussion of important financial topics such as sources of long-term and short-
term finance; leverages; capital structure policies and decision; dividend policy and decision; working capital management; inventory management; receivables
management; cash management; financial statement analysis and financial forecasting. The course would further help the students examine the important tools
and techniques useful in enhancing their critical thinking and developing decision-making skills in the context of a corporate firm. The course also requires the
students to complete a comprehensive project on financial statement analysis and important ratios of a firm in a real life scenario that would enhance their
report writing and presentation skills.

Course Objectives
At the end of the course, students are expected to:
• Apply various tools and techniques in the financial decision making activity.
• Differentiate between various sources of long-term and short-term finances available to a firm.
• Evaluate the concept of leverages, capital structure, dividend policy, inventory management, receivables management and cash management.
• Analyze the capital structure policies and decision, dividend policy and decision, inventory management, receivables management and cash
management.
• Asses the firm’s financial performance using various tools and techniques like ratio analysis, common size analysis, comparative statements analysis
and trend analysis.

Learning Outcomes
 Develop in-depth qualitative and quantitative analytical skills useful for financial decision-making.
 Critically think through a problem and generate a set of alternatives.
 Apply technical and digital literacies through applications of technology for decision making real life situations.
 Develop required skills for sourcing of finance for a project.
 Evaluate the financial performance of a firm using various tools.
 Identify and implement strategies for maximizing shareholders’ wealth in a firm.

Recommended Text Book:

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 IBS Hyderabad (Academic Year – 2021-22)
 Financial Management, The ICFAI Foundation for Higher Education (IFHE), Hyderabad, September, 2020, Ref. No. FM-TB -IFHE – 092020.

Suggested reference books:

 Fundamentals of Corporate Finance by Stephen A. Ross, Randolph W. Westerfield, Jeffrey Jaffe, Bradford D. Jordan, and Ram Kumar Kakani, 12th
Edition, 2021, Mc Graw Hill Education (India) Private Limited
 Principles of Corporate Finance by Richard A. Brealey, Stewart C. Myers, Franklin Allen, 12th Edition, 2017, Mc Graw Hill Education (India)
Private Limited
 Fundamentals of Financial Management by Eugene F. Brigham, Joel F. Houston, 14th Edition, 2016, Cengage Learning

Case
/Reading
Session Chapte
Topic Key Concepts Learning Outcomes article/ Digital Tools
No. rs
Lecture /
Activity

Issuance of Shares through – https://ocw.mit.edu/courses/sloan-school-of-

(IPOs, Rights Issue, Private
Sources of Placement, Bought-out Deal);
01-03 Long-Term Preference Capital, Debenture
Finance Capital, Term Loans, Hire-
Purchase and Lease, Venture
Capital, Private Equity
Measuring and Analyzing
04-05 Leverages leverages - Operational,
Financial and Total Leverage
Capital structure Theories -
Traditional Approach, NI
Capital
approach, NOI approach &
06-08 Structure and
MM approach, Factors
Firm Value
Affecting Capital Structure
Decisions
09-10 Capital Business, financial and market
Cox
management/15-414-financial-management-
 Identify & compare/contrast Communicat
summer-2003/index.htm
the features of various ions, Inc.— Chapter
MIT Open Courseware: Lecture Notes under Part-4:
sources of long-term finance 1999 (HBS X
Financing Policy.
used by a firm. Case ID: 9-
Description:
221-003)
1. Raising Capital
 Understand the concepts of https://nptel.ac.in/courses/110/107/110107144/
operating, financial and NPTEL Videos Lectures: Unit - 12 of ‘Financial
Chapter
combined/total leverage. Management for Managers’.
VIII
 Appreciate the implications Description:
of leverages. 1. Capital Structure – Part I
https://nptel.ac.in/courses/110/107/110107144/
 Appreciate the relationship Blaine
NPTEL Videos Lectures: Units-11&12 of ‘Financial
between capital structure Kitchenware,
Management for Managers’.
and firm’s value. Inc.: Capital Chapter
Description:
 Understand the various Structure XI
1. Capital Structure –PartII
approaches to capital (HBS Case
2. Capital Structure – Part III
structure. ID: 4040)
3. Capital Structure – Part IV
 Understand the various types Winfield Chapter https://nptel.ac.in/courses/110/107/110107144/
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 IBS Hyderabad (Academic Year – 2021-22)
Refuse
risk, total risk , Determinants of risks. Management
of capital structure,
 Enumerate determinants of , Inc.: NPTEL Videos Lectures: Unit – 12 of ‘Financial
Approaches to estimating
Structure capital structure. Raising Debt Management for Managers’.
target capital structure, XI
Policy  Analyze the EBIT-EPS vs. Equity Description:
variables in capital structure,
relationship under different HBS Case 1. Capital Structure – Part V
ROE - ROI Analysis, EBIT -
financing plans. ID: 9-913-
EPS analysis
530)
Sessions 1 to 10
11 TEST-1
Chapters covered – VIII, X, XI
https://nptel.ac.in/courses/110/107/110107093/
NPTEL Videos Lectures: Units – 1,2&3 of
‘Working Capital Management’.
Description:
 Understand the working Dell’s
Overview of Working Capital Concepts – 1. Introduction – I
capital concepts and Working
Working GWC, NWC, Working Chapter 2. Introduction – II
12-14 operating cycle. Capital (HBS
Capital Capital Gap; Components of XIII 3. Nature of the Working Capital Management
 Identify the factors Case ID: (9-
Management Operating Cycle 4. Approaches of Working Capital Management – I
influencing working capital. 201-029)
5. Approaches of Working Capital Management – II
6. Operating Cycle
7. Working Capital Requirement Assessment - I
8. Working Capital Requirement Assessment - II
 Understand the need and https://nptel.ac.in/courses/110/107/110107093/
nature of inventory. NPTEL Videos Lectures: Units – 4&5 of ‘Working
 Analyze inventory problem Capital Management’.
Gentle
Nature, Role and Purpose of as an investment decision. Description:
Electric Co.
Inventory Inventory, Costs Associated  Assess the significance of Chapter 1. Risk and Cost of Holding Inventory
15-17 (HBS Case
Management with Inventory, Inventory carrying, ordering and stock- XV 2. Inventory Costs
ID: 9-672-
Management Techniques out costs. 3. Inventory Behaviour
038)
 Types of inventory 4. Inventory Management Methods and Strategies
management – ABC, EOQ, 5. EOQ Technique of Inventory Management
Safety Stock etc. 6. Stockouts cause Walkouts
18-19 Receivables Purpose of receivables and  Comprehend the terms of Shenzhen Chapter https://nptel.ac.in/courses/110/107/110107093/
Management costs of receivables, credit payments widely used in JIT XVI NPTEL Videos Lectures: Units – 6,7,8&9 of
policy and monitoring practice. Technology: ‘Working Capital Management’.
receivables  Realize the need and goals Accounts Description:
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 IBS Hyderabad (Academic Year – 2021-22)
of establishing a sound
credit policy. 1. Management of Accounts Receivables – I
Receivable
2. Management of Accounts Receivables – II
 Understand various methods Management
3. Management of Accounts Receivables – III
of monitoring receivables. Issues (IVEY
4. Limitations of Credit Time Period
 Receivables Exchange of Publishing
5. Goals and Functions of Accounts Receivables
India Ltd (RXIL) Cases ID –
Management
 Trade Receivables W17204)
6. Credit Policy Variables
Discounting System (TreDS)
Sessions 11 to 20
20 TEST-2
Chapters covered – XII, XIII, XV
https://nptel.ac.in/courses/110/107/110107073/
NPTEL Videos Lectures: Units – 7,8&10 of
Introduction
‘Financial Statement Analysis and Reporting’.
to Financial
Description:
Financial Statements – Need Ratios and
 Comprehend and assess the 1. Ratio Analysis Part-I
Financial and Importance, Common Financial
firms’ financial performance Chapter 2. Ratio Analysis Part-II
21-24 Statement Size Analysis, Comparative Statement
using various tools and VI 3. Ratio Analysis Part-III
Analysis Analysis, Trend Analysis, Analysis
techniques. 4. Different Sets of Ratios Part-I
Ratio Analysis (HBS Case
5. Different Sets of Ratios Part-II
ID: 9-193-
6. Dupont Ratios Part-I
029)
7. Dupont Ratios Part-II
8. Valuation of Capital Market Ratios Part-I
 Realize the importance of
Is a Share
dividend policy and its https://nptel.ac.in/courses/110/107/110107144/
Dividend Policies; Dividend Buyback
impact on firm value. NPTEL Videos Lectures: Unit-12of ‘Financial
Dividend Theories - Traditional, Walter, Right for
 Understand the logic of Chapter Management for Managers’.
25-27 Policies & Gordon and MM theories, Your
dividend irrelevance. XII Description:
Theories Share repurchase, Bonus Company?
 Enumerate the market 1. Dividend Decisions – Part I
issue, Stock split (HBS Case
imperfections that make 2. Dividend Decisions – Part II
ID: R0104K)
dividend policy irrelevant.
28-29 Cash Cash management, Cash  Identify the motives and Chapter https://nptel.ac.in/courses/110/107/110107093/
Management Budget and playing the float needs for holding cash. XVII NPTEL Videos Lectures: Units – 10&11 of
 Understand the techniques ‘Working Capital Management’.
for preparing cash budget. Description:
 Enumerate the factors that 1. Cash Management
determine the required cash 2. Models of Cash Management
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 IBS Hyderabad (Academic Year – 2021-22)
3. Certainty Model by Baumol
4. Uncertainty Model by Miller & Orr
5. Cash Management Techniques
https://nptel.ac.in/courses/110/107/110107127/
NPTEL Videos Lectures: Unit-4 of ‘Management
balances. Accounting’.
Description:
1. Cash Budget – I
2. Cash Budget – II
3. Cash Budget – III
4. Cash Budget – IV
https://nptel.ac.in/courses/110/107/110107093/
NPTEL Videos Lectures: Units – 11&12 of
‘Working Capital Management’.
 Assess the benefits and costs Pacific
Behavior of current assets and Description:
of trade credit. Grove Spice
Financing pattern of financing current Chapter 1. Management of Current Liabilities
30  Understand the norms used Company
Current Assets assets, current asset financing XIV 2. Management of Accounts Payable
by banks in financing a (HBS Case
instruments 3. Other Accruals and Overtrading
firm's working capital needs. ID: 4366)
4. Bank Finance – Introduction
5. Recommendations of Tandon and Chore
Committees
Using company’s data from PROWESS database, each group (5-6 Show the student how to:
students) is required to present on various financial ratios.
 Access and collect the data from databases like Prowess and Capitaline
Parameters for evaluation:
31-33 Project Work Plus.
Financial Statement Analysis, Comparison of ratios with industry
 Perform calculations in excel, report writing and presentation using power
standard and with its competitor’s ratios along with interpretation
point.
and suggestions.

Expectations from Students

a. Students must report to the respective sessions well before the announced time. Latecomers will not be permitted to join the class after the scheduled
time. If late, the attendance for that session will be marked as absent.
b. Read the Case Study / material well prior to the class discussion. He/she is also expected to read the chapter indicated in the course plan as the faculty
directs.

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 IBS Hyderabad (Academic Year – 2021-22)
c. In the class discussion student is expected to participate actively and contribute to individual and group learning. Evaluation is based on active
participation.

Evaluation Timelines
Keeping in line with continuous evaluation at IBS the following evaluation schedule has been drawn. Students are expected to go through the dates /
sessions mentioned and prepare accordingly.

Component Component Expected slot / Marks Weightage

Number due date declaration by
Test I 1 11th session 13th session 15
Test II 2 21stsession 23ndsession 15
Project report 3 31-33 session 33rd session 20
Class Participation 4 33rd session 33rd session 10
End exam At the end of Exams dept Exams dept 40
the semester shall plan and shall plan and
communicate communicate
Total 100

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