Lahore University of Management Sciences

FINN 100 – Principles of Finance

Spring Semester 2023

Instructor Zainab Mehmood

Room No. 3-21 SDSB Building
Office Hours Tuesday & Thursday 11 am-1 pm
Email zainab.mehmood@lums.edu.pk
Secretary Bushra Kanwal

Course Teaching Methodology (Please mention following details in plain text)

 Teaching Methodology: In person teaching

COURSE BASICS
Credit Hours 3
Lecture(s) Nbr of Lec(s) Per Week 2 Duration 75 Minutes
Recitation/Lab (per week) Nbr of Lec(s) Per Week Duration
Tutorial (per week) Nbr of Lec(s) Per Week Duration

COURSE DISTRIBUTION
Core Yes
Elective
Open for Student All
Category
Close for Student Who have not done ACCT 100
Category

COURSE DESCRIPTION

Firms invest in real assets such as plant and equipment (the Investment decision) and raise money via personal funds,
stocks, bonds or bank loans (the Financing decision). Broadly speaking, Financial Management is about how this
Investment and Financing decisions should be made. This course explores the first part of Financial Management and
introduces the framework, tools, and techniques for making Investment decisions. Specifically, we will cover
Valuation, Capital Budgeting, Modern Portfolio Theory and Equilibrium Risk-Return Relationship.
This is an introductory course in Finance and the first in a series of required Finance core courses for the B.Sc.
Accounting & Finance degree. This course together with the next course, Intermediate Finance, completes an
introduction to modern theory of Corporate Finance. The final required course in the sequence, Applied Corporate
Finance, introduces advanced topics and explores certain topics in depth.

Page 1 of 9
 Lahore University of Management Sciences

COURSE PREREQUISITE(S)
ACCT 100.
MS Excel

COURSE LEARNING OUTCOMES (CLO)

Upon successful completion of the course, students should be able to:
1. Demonstrate understanding of the concept of Time Value of Money (TVM) and its applications
2. Demonstrate understanding of the concept of Risk and Return
3. Demonstrate knowledge of the basics of Capital Budgeting and techniques of evaluation
4. Demonstrate knowledge of the Cost of capital and Capital structure.
5. Present their analysis effectively, both in oral and written forms, while working in teams as well
as independently. (General Learning Goal)
UNDERGRADUATE PROGRAM LEARNING GOALS & OBJECTIVES
General Learning Goals & Objectives
Goal 1 –Effective Written and Oral Communication
Objective: Students will demonstrate effective writing and oral communication skills
Goal 2 –Ethical Understanding and Reasoning
Objective: Students will demonstrate that they are able to identify and address ethical issues in an
organizational context.
Goal 3 – Analytical Thinking and Problem-Solving Skills
Objective: Students will demonstrate that they are able to identify key problems and generate viable
solutions.
Goal 4 – Application of Information Technology
Objective: Students will demonstrate that they are able to use current technologies in business and
management context.
Goal 5 – Teamwork in Diverse and Multicultural Environments
Objective: Students will demonstrate that they are able to work effectively in diverse environments.
Goal 6 – Understanding Organizational Ecosystems
Objective: Students will demonstrate that they have an understanding of Economic, Political,
Regulatory, Legal, Technological, and social environment of organizations.

Major Specific Learning Goals & Objectives

Goal 7 (a) – Program Specific Knowledge and Understanding
Objective: Students will demonstrate knowledge of key business disciplines and how they interact
including application to real world situations.
Goal 7 (b) – Understanding the “science” behind the decision-making process (for MGS Majors)
Objective: Students will demonstrate ability to analyze a business problem, design and apply
appropriate decision-support tools, interpret results and make meaningful recommendations to support
the decision-maker

Indicate below how the course learning objectives specifically relate to any program learning goals and objectives.

Page 2 of 9
 Lahore University of Management Sciences
Program Learning Goals and Course Learning Objectives Course Assessment Item
Objectives
Goal 1 –Effective Written and Oral Students will be given opportunities to CP, Project write up & presentation,
Communication demonstrate their ability to Exams
communicate effectively (CLO #5)
Goal 2 –Ethical Understanding and Ethical perspectives in financing Group project
Reasoning decision
Goal 3 – Analytical Thinking and Analytical Thinking and Problem- CP, Quizzes, and exams
Problem-Solving Skills Solving Skills are an essential
component of the course (CLO 1-5)
Goal 4 – Application of Information Application of information technology Project write up & presentation
Technology in for assignments, projects
Goal 5 – Teamwork in Diverse and Students work in groups for group Group project
Multicultural Environments projects
Goal 6 – Understanding Develop student’s understanding of CP, Project write up & presentation,
Organizational Ecosystems the interaction of micro (firm specific) Exams, quizzes
variables with the macro (securities
markets, industry, and the economy)
variables
Goal 7 (a) – Program Specific Introduction to the topics in CP, quizzes and exams
Knowledge and Understanding Managerial Finance (CLO 1-5)
Goal 7 (b) – Understanding the
“science” behind the decision-making
process
GRADING BREAKUP AND POLICY

POLICIES

Classroom policies

 You are allowed a maximum of three (3) absences in the course. These absences are meant to be used only in
case of contingencies (e.g., sickness) and include all the petitioned absences. Medical certificates from doctors
will not be accepted. Please use your absences carefully. It’s been observed that a lot of students suffer for not
carefully planning their absences in the past. For each absence over the allowed 3 absences, one percentage
point will be deducted from the attendance grade of 5%.
 You are expected to be in the class by the time class starts, as entering class after it starts creates a lot of
distraction not only for students who were on time but also for the instructor. Late arrivals will be given only
half presence in class, and the half absence will be added to the total absences . Same policy applies for early
leavers.
 An overall absence of 10 minutes or more, in a session shall be deemed as an absence for the full session.
 You are noted for late coming and early leaving or unnecessarily leaving the class during the class hours.
 Class participation includes handwritten in class or as homework submissions.

Page 3 of 9
 Lahore University of Management Sciences
 All ethical norms shall be observed in the class and examinations.
 Please turn off your Cell phones or put them on Silent mode. Use of Smartphone, internet, online chatting, or
use of technology related gadgetry of any kind is not allowed.

Policy regarding examinations, quizzes, and other grading instruments

There is a zero-tolerance policy (ZTP) for any undesirable behavior or undeserving attempt to improve your grades
during the quizzes, examinations or afterwards. Such action can result in cancelling your examination paper. It may
also result in disciplinary actions by the Disciplinary Committee. Please carefully weigh in your action’s costs and
benefits and always show an ethical and moral deportment and behavior.

Continue, Start, Stop formative feedback

I’ll be keeping at least two touchpoints for your formulative feedback in the form of Continue, Start, and Stop format.
You can share your feedback on what you’d like me to continue, start or stop in the course. This will help with a
smooth running of the course and improve our learning experience in the course.

GRADING BREAKUP

Attendance and Class Participation: 10% (5%+5%).

Details are mentioned in the classroom policies above.

Quiz(s) 20%

There shall be a total of 5 Announced Quizzes. One quiz will be dropped (N – 1) while calculating the final quiz score.
No sharing of calculators, or any help sheet will be allowed.

ASSIGNMENTS (10%):
There will be two assignments during the semester. The first assignment is about the Company’s Ratio analysis along
with the analysis of the Economy and the industry to suggest the company’s SWOT. The second assignment is about
the measurement of a company’s systemic risk (beta) and how it affects the company’s WACC.

Midterm Examination: 25%

The examination could be mix of MCQ, short exercises, and short explanations.

FINAL EXAMINATION: 35%.

The examination could be mix of MCQ, short exercise, and short explanations. Students may also expect a question or
two from the assigned report or a case or a situation analysis.

Financial Calculator: You are required to buy or preferably borrow (if you are not an ACF major) a financial
calculator. Though many genres are available, but I would recommend TI BA II Plus.

There is a zero tolerance for any undesirable behavior to undeserving attempt to improve your grades during

Page 4 of 9
 Lahore University of Management Sciences
the quizzes and examinations.

EXAMINATION DETAIL

Midterm YES
Exam

Final Exam YES

COURSE OVERVIEW/SCHEDULE
Lecture/ Module Topics Recommended Objectives/
Readings Application
Week 1, Session 1 1.1- Finance and Business: Readings: Chapter 1 of LG Session 1
Introduction to the course; 1.-Role and Environments Introduction to the Course
What is Finance; Why of Managerial Finance. Structure
Study Managerial Finance.
1.2- Goals of the Firm:
Maximizing Profit or
wealth? corporate
governance and business
ethics
1.3- Managerial Finance
functions: organization of
Managerial Finance
function; relationships to
economics and accounting.

Week 1, Session 2 3.1- Stockholder’s Report: Readings: Review basic accounting

Four key Financial Chapter 3. concepts and revisit the Ratio
Statements and notes of Reading Financial analysis
financial reports. Statement analysis.
3.2- Using Financial
Ratios: user of financial
ratios; Types of Ratio
comparison; Cautions
about using Financial
Ratios Analysis. Such as
Liquidity; Activity; Debt;
Profitability and-Market
ratios
Week 2, Session 3 3.8- A Complete Ratio Readings: Review of basic accounting

Page 5 of 9
 Lahore University of Management Sciences
Analysis: Chapter 3. concepts. Revisit Ratio
Summarizing all ratio Financial Statement analysis
analysis; DuPont System Analysis
of Analysis. exercises
Week 2, Session 4 4.1- Analyzing the Firm’s Readings: Revisit the Preparation of
cash Flow Chapter 4. Cash Flow from a finance
4.2- Financial Planning Cash Flow and Financial manager’s perspective
process Planning
4.3- Cash planning and
Cash Budgets

Week 3, Session 5 4.4- Profit Planning: Pro
forma Statements
4.5- Pro forma Income
statements
4.6- Pro forma Balance
sheet
4.7- Evaluation of Pro
forma Statements
QUIZ 1 Chapters 1, 3, and 4
Warm-up Exercises Revisit the Preparation of
Integrative case 1 Track Cash Flow from a finance
Software Inc. manager’s perspective
Importance of Spreadsheet
and financial modeling on
Excel to be emphasized.

Week 3, Session 6 2.1- Financial Institutions Readings: Importance of Spreadsheet

and Markets: Financial
Institutions; Money &
Capital Markets.
Scope and Areas of
finance and how it is
related to other areas of
business.
2.4-Business Taxes:
Ordinary Income and
Capital gain taxes.
Week 4, Session 7 5.1-The role of the TVM
in Finance
5.2- Single Amount &
Review questions
Week 4, Session 8 5.3- Annuities &
Perpetuities.
5.4- Mixed Stream
Chapter 2 Role and and financial modeling on
Environments of Excel to be emphasized.
Managerial Finance.
Role and Environments of
Managerial Finance
Class notes
Focus on Practice
Chapter, 5. Discussing the role of Time
Time Value of Money Value in Finance, The use of
computational tools, and the
basic patterns of cash flow.

Week 5, Session 9 5.5-Compounding Interest

More Frequently Than
annually
5.6- Special Applications
of Time Value

Page 6 of 9
 Lahore University of Management Sciences
QUIZ 2 Chapters 2 and 5
Week 5, Session 10 6.1: - Interest rates and
required Return:
6.2: - Corporate Bonds:
Week 6, Session 11 6.3: - Valuation
fundamentals:
6.4: - Bond Valuation.:
Week 6, Session 12 7.1: - Difference between
debt and Equity capital:
7.2: - Common and
Preferred Stock
Week 7, Session 13 7.3: - Common Stock
Valuation:
7.4: -Decision Making and
Common Stock
QUIZ 3 Chapters 6 and 7
MIDTERM
Week 8, Session 15 8.1: - Risk and return
Fundamentals
8.2: - risk of Single assets
Week 8, Session 16 8.3: - Risk of a Portfolio
8.4: - Risk and Return:
The Capital assets Pricing
Model (CAPM):
Week 9, Session 17 8.3: - Risk of a Portfolio
8.4: - Risk and Return:
The Capital assets Pricing
Model (CAPM):
Week 9, Session 18 9.1: - Overview of Cost of
capital
9.2: - Cost of Long-Term
Debt
9.3: -Cost of Preferred
stock
Week 10, Session 19 9.4: - Cost of Common
Stock
9.5: - Weighted average
cost of Capital
QUIZ 4 Chapters 8 and 9
Week 10, Session 20 10.1:- Overview of
Chapter 6. Describe interest rate
Interest rates and Bond fundamentals, the term
Valuation structure of interest rules and
risk premiums.
Understanding the key inputs
and basic model used in the
valuation process.
Chapter 7. To Differentiate between debt
Stock Valuation and equity capital.
Discuss the rights,
characteristics, and features of
both common and preferred
stocks.
Chapter 8. Understanding the meaning
Risk and Return and fundamentals of risk,
return, and risk preferences.
Discussing the measurement
of return and standard
deviation for a portfolio.
Chapter 9. The cost of To understand the key
Capital assumptions, the basic
Focus on Ethics concept, and the specific
Non-Financial sources of capital associated
consideration in Project with the cost of capital.
Selection
Chapter 10 & 11. Understanding the key
Page 7 of 9
 Lahore University of Management Sciences
Capital budgeting: Capital Budgeting Cash motives for capital
11.1:- Relevant cash Flows expenditure and the steps in
Flow: Focus on Ethics the capital budgeting process.
Non-Financial Define basic capital budgeting
11.2:- Finding the Initial consideration in Project terminologies
Investments

Week 11, Session 21 11.3: - Finding the Replacement projects

Operating Cash Flow:
11.4: - Finding the
Terminal Cash Flow:
11.5: - Summarizing the
relevant Cash Flow
Week 11, Session 22 10.1: - Overview of Chapter 10. Understanding the role of
Capital Budgeting: Capital Budgeting capital budgeting techniques
10.2: - Payback Period: Techniques in the capital budgeting
10.3: - Net Present Value process.
Week 12, Session 23 10.4: - Internal rate of Use net present value profiles
Return: to compare NPV and IRR in
10.5: - Comparing NPV techniques
and IRR Techniques
Week 12, Session 24 13.1: - Breakeven Chapter 13 To understand operating,
Analysis, Operating Leverage and Capital financial, and total leverage
Leverage, Financial Structure and the relationships among
Leverage, and Total them.
Leverage. To discuss the EBIT-EPS
13.2: Firms’ Capital approach to capital structure.
Structure To introduce net working
13.3: -EBIT EPS capital management and the
Approach related trade-off;

QUIZ 5 Chapters 10 and 13

Week 13, Session 26 Working Capital Chapter 15: Working To understand the cash
Management capital and current asset conversion cycle, its funding
15.1 Net Working Capital management requirements, and the key
Management strategies for managing it
15.2 Cash Conversion
Cycle
Week 14, Session 27 15.3 Inventory Chapter 15: Working To introduce Inventory
Management capital and current asset Management and the
15.4 Account Receivables management management of receipt and
Management disbursements
Week 14, Session 28 16.1 Spontaneous Chapter 16: Current To understand the effects of
Liabilities liability management stretching accounts payable
16.2 unsecured sources of on
short-term loans their cost and the use of
Page 8 of 9
 Lahore University of Management Sciences
16.3 Secured sources of accruals; and to discuss
short-term loan interest rates and the
basic types of unsecured and
unsecured sources of short-
term loans
Final Exam

TEXTBOOK(S)/SUPPLEMENTARY READINGS
Required Text: Principles of Managerial Finance by Lawrence J Gitman 13th edition
To stay abreast with the market a regular reading of financial press is essential to understanding and appreciation of the
body of knowledge and the subject matter of the course. Reading of other introductory textbooks on the subject is
encouraged to find out the other writer’s point of view about the pedagogy.
Supplementary Text:
Richard A. Brealey, Stewart C. Myers, Franklin Allen-Principles of Corporate Finance-10 th edition (2011)
Supplementary Readings:
• Students are encouraged to read financial publications such as The Wall Street Journal, Financial Times; Business
Recorder to stay abreast of developments related to this course.

Page 9 of 9