FIN 2732 - Fundamental of

Financial Management
Introduction to the module
Coverage
Unit I: Introduction to Financial Management & Time Value of Money: Nature and Scope
of Financial Management; Finance Functions; Financial Goal: Profit Maximization vs. Wealth
Maximization; Role of Finance Manager; Interface of Finance with Other Functional Areas; Time
Preference for money; Future Value and Present Value: Lump Sum and Annuity, Sinking Fund; Exercises
on Future Value, Present Value and Bond Valuation
Unit II: Investment Decision: Concept of Capital Budgeting; Various Investment Decisions; Capital
Budgeting Techniques - PBP, NPV, PI, IRR & ARR etc.; Concept of Capital Rationing
Unit III: Cost of Capital: Concept and Significance of Cost of Capital; Cost of Debt, Preference Capital
and Equity Capital; WACC Using Book Value Weights and Market Value Weights
Unit IV: Financing Decision: Concept of Capital Structure; Overview of Theories of Capital
structure: NI Approach, NOI Approach, Traditional Approach, MM Hypothesis; Leverage Analysis-
Operating, Financial and Combined Leverage
Unit V: Dividend Decision: Dividend: Concept, Types and Significance for Shareholders; Dividend
Policy; Theories/Models in Dividend Policy: Walter Model, Gordon Model, MM Approach
Unit VI: Working Capital Management: Working Capital: Concept and Types; Determinants of
Working Capital; Overview of Cash Management, Receivables Management and Inventory Management
Assessment
• MSE – 20% (week starting 23rd Oct)
• Project – 10% report & 10% presentation
• End semester exam – 60%
Project Report - Financial Analysis
• Group size: 3-4 members
• Word limit: 2000 Words (maximum)
• For this group assignment, you can take any firm operating at any level (small, medium or
large) and you are required to give the name of the firm in advance to avoid overlapping.
• A thorough analysis for the last three years needs to be done after collecting information
based on primary and secondary sources like interactions with the concerned person,
interviewing the department head etc. This assignment should be presented in form of a
report containing
• Address and background of the organization (not more 250 words)
• Sources of loan (organized or unorganized), interest rates, conditions imposed by lenders, maturity period
etc
• Proportion of various sources, if funding is done through multiple sources
• How much do they rely on internal funding?
• Reasons for raising funds through the stated sources
• Make recommendations for optimal capital structure to the organisation.
• Dividend policy
• Working capital management Policy, Financing of working capital
Main reference book
• Financial Management by Prasanna Chandra 8e, McGrow Hill