KCOURSE TITLE: FINANCIAL MANAGEMENT

Semester: Spring 20232024 Class: MBA – Class of 20242025

Instructor: Dr. Syed Mubashir Ali Email: smali@lums.edu.pk
Room No: 4-0009 Telephone: 8083
Office Hours: TBA Secretary Abdul Basit 8082
COURSE OVERVIEW

1. Description of the course

Financial Management (FMG) is the core finance course in the MBA program. FMG
introduces students to theories and techniques for managing capital sources and uses
within the framework of shareholder wealth maximization. Thus, the course aims to
equip students with the basic tools and techniques necessary to be a successful
financial manager or general manager with a good understanding of the basic
principles of finance. These skills are vital for most positions that students will seek
and obtain, regardless of area of concentration or industry.

The purpose of this course is to give a broad overview of the field of financial
management and a thorough grounding in certain key areas. The FMG course will
impart fundamental skills and methods of financial management and provide students
a base level sophistication regarding contemporary issues in financial policy and
financial management. This will clarify the role of finance in today’s corporate
strategy and policy. The course will build upon the basic building block of finance;
time value of money and the valuation of securities. It will then emphasize concepts
such as strategic investment and financing decision including capital budgeting, cost
of capital and capital structure decisions. The course will then introduce other
financial issues such as dividend policy, the different types of financing options
available to corporations and short-term financial management.

The FMG core course complements knowledge acquired in Financial Reporting and
Analysis, Managerial Accounting and Control Systems and Managerial Economics
courses. Due to the nature of the course, students make financial models, hence
knowledge acquired in Decision Analysis and Statistics courses also comes in very
handy. This course also provides sound basis for second year elective courses such as
Corporate Finance, Investments, Topics in Finance and Management of Financial
Institutions. The technical skills learnt in this course are also used in International
Finance and Commercial Banking courses.

2. Specific Learning Objectives

By the end of the course students should be familiar with the key concepts and
techniques used in Finance for making the two critical decisions: the decision to invest
and the decision on financing. The students will also be familiar with asset pricing
models, firm-specific behavior, and financial markets. They get to look at a
significant amount of data from Pakistan and the global financial markets. Throughout
the course, students are expected to do quantitative analysis using spreadsheet models.

The course blends theoretical and practical sides of investments through cases,
lectures, assignments and presentations. Derivative securities and markets are not
explicitly addressed in this course since those markets are covered through separate
 courses.

Specifically, the course comprises the following Six modules:

I. Module 1 – OVERVIEW OF FINANCE AND SECURITY VALUATION:

The introductory module of the course sets up the theme of the course and puts the
context in finance as a subject would be studied in the MBA programme. Focus is
going to be developing a more refined and deeper understanding of the subject and
moral, ethical and societal concerns and impacts will be highlighted. The role of
the markets and the efficiency of the market and data-based decision making will
also be a major concern. The basic valuation model of debt and equity and the
time value of money covered in the earlier semester will be reintroduced.

II. Module – 2 STRATEGIC INVESTMENT DECISIONS

The main focus of this module is to develop a deep understanding of the strategic
investment decisions that shape the future of organizations; essentially the left-
hand side of the balance sheet. Planning and executing the asset side decisions
will be the focus of this module and relevant costs and their impact on the
feasibility of projects will generate furious debate. The students will also start
building financial models and will be required to submit them prior to the class
discussion.

III. Module – 3-A COST OF CAPITAL, CAPM & FINANCIAL STRUCTURE

DECISIONS:
This module takes the focus to the right side of the balance sheet. The cross-
cutting theme would remain decisions making under uncertainty and the sources
and cost of capital and implication of various factors on the risk and return profile
of investment will be debated.

IV. Module – 3-B STRATEGIC FINANCING DECISIONS AND DIVIDEND

POLICY:
In this module the firm value as a combination of decisions about debt and equity
and the underline business risk will be explored. The impact of capital structure as
a source of risk will also be highlighted and the optimum capital structure debate
will also be deliberated.

V. Module – 4 SHORT TERM FINANCIAL MANAGEMENT

In this module students will be realizing the close linkage between short term
financial management and long-term business survival. The cases in the module
highlight the immediate and quick impact of mismatch in short term policies and
their ramifications on firm’s ability to remain a going concern.

VI. Module – 5 LONG-TERM FINANCIAL PLANNING

This module provides the student with an opportunity to learn about long term
financial decisions about funding opportunities in the market, revisit the efficient
market hypothesis in the context of debt and equity markets. Bond refunding and
lease financing as a potential funding source will also be discussed.
LEARNING OUTCOMES

Upon completion of the course, students should be able to:

1. Demonstrate the understanding of the key role played by financial management in the
life of organizations, whether for profit or not for profit.
2. Through the various themes that will be developed in the course, students will
appreciate the moral, ethical and societal concerns about financial decisions and will
appreciate the larger stakeholder involvement in the affairs of the organizations.
3. Understand at a much deeper level, the two-key decision in finance; what to invest
and how to make that investment possible.
4. Demonstrate understanding of the investment environment, financial markets,
investment vehicles, and risk-return relationship.
5. Use portfolio theory in asset allocation and choice of risky assets and how using
alternative models including CAPM, DGM etc. can costs of capital be determined.
6. Appraise empirical evidence associated with debt and equity markets
7. Will be able to build financial models and have discussion about the implication of
various scenarios and simulations.
8. Present their analysis, evaluation, and recommendations of issues/problems effectively
in both oral and written forms.

MBA PROGRAM LEARNING GOALS & OBJECTIVES

1. Leadership and teamwork: Students will be able to assume leadership roles, perform
leadership tasks responsibly, and work effectively in teams.
2. Functional, integrative and strategic abilities: Students will demonstrate
understanding of the functional and strategic aspects of business and management, be
able to integrate across functional areas, and develop feasible strategies and action
plans.
3. Critical thinking and decision making: Students will be able to identify key
problems, collect and use information critically, and generate viable alternatives and
solutions.
4. Global perspective and flexibility: Students will demonstrate understanding of
global and multi-cultural perspectives within the local context and be able to work
effectively in multi-cultural settings.
5. Social, ethical, economic and environmental responsibility: Students will be able to
understand the broader ramifications of their decisions and assess the impact of
economic, ethical, environmental factors on the policies, strategies and operations of
the organization.
6. Effective communication: Students will be able to communicate clearly and
persuasively in writing and verbally, in ways appropriate for a variety of objectives
and audiences.
7. Entrepreneurialism and innovativeness: Students will be able to create, identify,
assess, shape and act on opportunities in a variety of contexts and organizations.
8. Managing pressures, complexities and uncertainties: Students will be able to
manage pressures and resource constraints, and think, decide and act in complex and
ambiguous situations.
9. Diversity and Inclusion: Students will be able to appreciate differences in gender, class,
religion, ethnicity, learning styles etc. and learn how these differences enrich spaces, teams
 LEARNING OUTCOMES
and institutions.
Indicate below how the course learning objectives specifically relate to any program learning
goals and objectives.
Program Learning Goals
and Objectives
Goal 1 – Leadership and
Teamwork
Goal 2 – Functional,
integrative and strategic
abilities
Goal 3 – Critical Thinking –
Decision making capabilities
Goal 4 – Global perspective
and flexibility
Goal 5 – Social, Ethical,
Economic and
Environmental
Responsibility
Goal 6 – Communication
competency
Goal 7 – Entrepreneurialism
and innovativeness
Goal 8 – Managing
pressures, complexities and
Uncertainties
Course Learning Objectives
Students will work in discussion
groups to discuss their models for
class discussions.
Through cases and readings
students will be considering the
functional, integrative and strategic
choices and decisions and will
develop a holistic perspective
about the finance function.
Application of critical thinking and
decision making through case
studies.
Students will be looking at
empirical data from both local and
international markets
Ethical issues related to financial
management decisions are
addressed throughout the course. In
fact, the centrality of ethics and
morality is an integral part of the
theme that will be developed in the
course
The high CP grade as well as
mandatory presentation is a
requirement.
Several cases highlight the
entrepreneurial element and issues
related with private and new
startup companies are discussed.
Managing investment risk and
uncertainty is a course component
– ability to handle course related
pressure is a given and is reflected
Course Assessment Item
Class participation and
quizzes have a weight of
50% in the course grade.
CP, Quizzes, WAC, and
Final Exam will be testing
student’s performance on all
these dimensions
CP, Quizzes, WAC, and
Final Exam will be testing
student’s performance on all
these dimensions
CP, Quizzes, WAC, and
Final Exam will be testing
student’s performance on all
these dimensions
CP, Quizzes, WAC, and
Final Exam will be testing
student’s performance on all
these dimensions
CP and Group Presentations
CP, Quizzes, WAC, and
Final Exam will be testing
student’s performance on all
these dimensions
CP, Quizzes, WAC, and
Final Exam will be testing
student’s performance on all
Indicate below how the course learning objectives specifically relate to any program learning
goals and objectives.

in course achievements. these dimensions

Goal 9 - Diversity and The high CP grade as well as CP and Group Presentations
Inclusion mandatory presentation is a
requirement.

COURSE ASSESSMENT/GRADES

Grading Instruments

The following instruments of evaluation shall be used to assess individual performance.

Basis of Evaluation % of
Total
Class Participation and Quizzes 50
WAC / Mid Term 15
Final Examination 35
Total 100

Class Participation: Students are expected to read the assigned materials and prepare for
each class session ahead in order to contribute intelligently to class discussions. Class
participation grade depends on your involvement in class discussions and the quality of
your input. A few bad class participations will be adjusted by dropping a few sessions in
the overall grade. But be aware this cannot construe a policy where you decide to “take it
easy” for a few sessions. You must remember it is indeed relative grading.

Quizzes: Several unannounced quizzes are planned for this course. No make-up will be
given for the missed quizzes. However, the lowest quiz grade including a zero for a missed
quiz may be disregarded.

Assignments/Financial Models: You will be required to build your financial model for
the case and will be required to hand it in BEFORE class. Failure to complete this
assignment means you relinquish your chance to participate and contribute to class
discussion. The financial models will encourage usage of Excel spreadsheet in performing
financial analysis and this practice of working with spreadsheets in data analysis is a useful
tool for most careers in the area of management, particularly finance.

Group Presentations: There are two group presentations planned in the course. These
formal presentations are mandatory, and all students are required to fully participate in
them. Details about this component will be shared later in the semester.

WAC/Mid Term: The course has a WAC as a graded instrument. Details about this
component will be shared later in the semester.
COURSE ASSESSMENT/GRADES
Final Examination: The final exam may comprise a blend of MCQs and open-ended
questions, case lets, or an integrative case for analysis.

CLASS-MANAGEMENT POLICY

Class Attendance: Students are expected to attend all classes. The Class also includes
Group Discussion and is part of the Class. If you are not present at the beginning of the
Group Discussion or leave class without instructor’s prior permission, you will be
considered absent for the day.

Academic Integrity: The University code, rules and policy on academic integrity will be
strictly enforced. The use of unauthorized materials, plagiarism, benefiting from the work
of other students or communication with fellow students during an examination, and other
similar activities that defeat the intent of any academic assignment will be handled strictly
in accordance with the University policy.

COURSE REQUIREMENTS

The Financial Management course is divided into the following Modules:

• Overview of Finance and Security Valuation
• Strategic Investment Decisions
• Cost of Capital, CAPM & Financial Structure Decisions
• Strategic Financing Decisions & Dividend Policy
• Short-term Financial Management
• Long-term Financial Planning

RECOMMENDED TEXTBOOKS/SUPPLEMENTARY READINGS ( if Applicable)

Textbook:
Eugene F. Brigham and Michael C. Ehrhardt (16 th Edition, 2019), Financial Management:
Theory and Practice, Cengage Learning. (BE)
Supplementary Text:
All students are REQUIRED to check out a SUPPLEMENTARY TEXT from the
LUMS library. Please browse the books and choose one which has a writing / explanation
style that you find satisfactory. More importantly, it should also have answers to the end of
RECOMMENDED TEXTBOOKS/SUPPLEMENTARY READINGS ( if Applicable)

the chapter questions so that you can review your answers.

REQUIREMENTS (FOR PCO OFFICE)

WAC Yes open book/open notes

Final Exam: Yes One A-4-page help sheet.

Financial calculators allowed.

Double Session: Yes Sessions 19&20 and 2625&26

Joint Session (combined of two Yes Session 01, 10 and Mega Quiz
sections):

Simulation: Yes/No: If yes, then which session(s):

Type of simulations (Harvard etc.)
must also be mentioned.

Video Recording: Yes/No: If yes, then which session(s):

IT Lab sessions Yes/No: If yes, then which session(s):

Additional session or review Yes/No: If yes, then after which session(s):

session

Course Cap (applicable for Please If yes, then what should be the
elective courses) mention if cap?
you would
Standard Cap in an Elective like to cap the
Course is 50 course at a
number other
than 50:
Yes/No:

Any other requirement (e.g. Yes/No: If yes, what requirement:

laptop/computer etc.):
And in which session(s):
 READING
Session
TITLE OF CASE/Session # MATERIA LEARNING OBJECTIVES
No.
L

Module 1 – OVERVIEW AND ETHICAL FOUNDATION OF FINANCE

Session 1 Overview of Financial Management 1 B&E Introductory session.

Chapters 1,2
Joint and 3
session

Session 2 Ethics, Finance & Fiduciary Revise Introductory case. Sets up the entire course with themes and issues
Responsibility Chapters 1,2 that will be referred to during the entire run of the course. It also
and 3 has three chapters assigned two of which are essentially refreshers
Finance and Ethics of accounting concepts learned by students in the last semester.
Case: Ben & Jerry’s Homemade
Assignment: Be prepared to discuss the
case and readings

Session 3 Ethical Financial Leadership This interesting and thought-provoking case brings discussion about
morals, ethics and its role in modern finance to the forefront.
Case: Defining the Purpose of Broussia Students will have to deliberate some very critical and values-based
Dortmund Norway Sells Walmart issues and understand the importance of information disclosure
requirements and role of financial intermediaries. such as hedge
funds and sovereign wealth funds in todays global markets. The
Reading: Ethics in Finance + Integrity assigned readings also forces one to contemplate the moral and
ethical dimensions in business decisions and its impact on larger
Assignment: Be prepared to discuss the society and community.
case and readings
 Module – 2 STRATEGIC INVESTMENT DECISIONS

Session 4 Creating Economic Value: Developing the 1 B&E, Discussion on core concepts. Local examples and comparisons.
Framework Chapters 10
and 11
Case:
Assignment: Be prepared to discuss the
Reading and Chapters from the course
assigned Book

Session 5 Case: General Pump Company, Inc. 1 Revise B&E, This is the first capital budgeting case. It is intended as an
Chapter 10 introduction to discounted cash flow techniques for evaluating
Assignment: Answer the questions in the investment alternatives, and it gives students an opportunity to
case practice the mechanics of capital budgeting.

Session 6 Case: Southern Sugar Company 1 Revise B&E, This case can be used to give students practice in defining cash flow
Chapter 10 streams of relevance for capital budgeting purposes. Issues of
Assignment: Answer the questions in the relevant costs and revenues are covered and problems associated
case with determining causality are discussed.

Session 7 Case: Spirit Sports 1 Revise B&E, This case permits students to delve more deeply into the topic of the
Chapter 11 relevant costs for use in economic analyses. Incremental analysis
Assignment: Answer the questions in the and causality are cornerstones of capital budgeting theory, but there
case are relatively few good cases that tackle the issue of which costs are
relevant.
Session 8 1 Revise B&E, The primary purposes of this case are to give students additional
Case: Grace Corporation: The Portable Ch. 10 & 11 practice in determining relevant costs for use in an economic
Computer Project analysis, and to show how acquisitions that change the timing of the
cash flow stream can be valuable to a firm.

Assignment: Answer the questions in the

case

Session 9 Case: Shaukat Khanum Diagnostic 1 Revise B&E, This case presents an interesting capital budgeting decision faced by
Centre Ch. 10 & 11 an NGO. The difficulty level is high and the students have to spend
considerable time in cash flow projection and NPV analysis.
Assignment:

Session JOINT SESSION (Review) 1 Assigned Course Review and Reflection

10 Chapters
Assignment: Reflect on the course so far Covered
Joint and be prepared for a discussion
Session

Module – 3 COST OF CAPITAL & FINANCIAL STRUCTURE DECISIONS

Session Cost of Capital 1 B&E, Discussion on core concepts. Local examples and comparisons.
11 Chapter 9
Case: Best Practices in Estimating the
Cost of Capital: Survey and Synthesis
(TBA)
Assignment: Be prepared to discuss the
case and readings
Session Case: Jumbo Burger 1 Revise B&E, This case highlights most of the things involved in straightforward
12 Chapter 9 cost of capital calculations. It is particularly helpful, because it
Assignment: Answer the questions in the closely parallels the typical textbook development of cost of capital
case calculations.

Session Case: Marriot Corporation: The Cost of 1 Revise B&E, This case allows students an opportunity to consider more involved
13 Capital Chapter 9, issues related to cost of capital determination keeping in mind
B&M various divisions within the company that are exposed to varying
Reading: Asset Betas and Equity Betas Reading degrees of risk. The divisional hurdle rates are determined for the
company.
Assignment: Answer the questions in the
case

Session Case: Midland Energy Resources Inc 1 Revise B&E,

14 Chapter 9,
Assignment: 1. How are Mortensen’s B&M
estimates of Midland’s cost of capital used? Reading
How, if at all, should these anticipated uses
affect the calculations?

Session Case: Mercury Athletic Footwear

15
Assignment: Answer the questions in the
case

Module – 4 STRATEGIC FINANCING DECISIONS

Session Capital Structure Theory 1 B&E, Various theories regarding the optimal amount of debt a firm
16 Chapters 14 should carry are discussed in this session.
Case: An Introduction to Debt Policy and & 15
Value
Assignment:
Session Case: E Corporation: The IPO for The purpose of this case is to illustrate how operating and financial
17 NetSet4 leverage interact to affect a firm's market value. The major emphasis
is on financial leverage. The analysis goes through the traditional
Assignment: Answer the questions in the and MM models, plus Miller's personal tax model.
case

Session Case: Port-a-John 1 Revise B&E, This case is designed to show the effect of financial leverage on the
18 Chapters 14 value of the firm and its weighted average cost of capital. Although
Assignment: Answer the questions in the & 15 the case is somewhat mechanical, it presents a very common type of
case. discussion and serves as a springboard for a discussion of many
subtle issues.

Session Case: Communication Satellite This is a case which uses the Capital Asset Pricing Model in the
19/20 Corporation context of examining issues of risk and cost of capital for a firm.
DOUBL Assignment: FCC: The required rate of
E return hearing
SESSIO
N

Session Case: Debt Policy at UST 1 B&E, The purpose of this case is to illustrate the type of thinking that goes
21 Chapters 17 into the workout strategy for a company in financial distress.
Assignment: & 24

Session Case: Suntech Power 1 B&E, The purpose of this case is to illustrate the type of thinking that goes
22 Chapters 17 into the workout strategy for a company in financial distress.
Assignment: & 24
 Module – 5 SHORT TERM FINANCIAL MANAGEMENT

Session Case: O.M. Scott & Sons Company 1 B&G Short Term financial management and challenges to a going concern
23 Chapter 16
Assignment:
1. As an official in O.M. Scott & Sons,
review the company's position? How was
Scott able to achieve its rapid growth?
2. Analyze the company’s financial
conditions in 1961 and evaluate its future
prospects. Would you change the
operational strategy of the firm?

Session Case: Carrefour S.A. 1 Revise B&G Short term financial management in retail industry. A low risk
24 Chapter 16 model
Assignment: What is Carrefour’s growth
strategy? Has it been successful? Evaluate
the company’s financial strategy. What are
the critical problems facing the firm? Are
joint ventures more profitable than
franchises? Can the Carrefour strategy be
replicated?
 Module – 6 LONG-TERM FINANCIAL PLANNING AND DIVIDEND POLICY

Session Case: Irwin Paper Industries 1 B&E, The purpose of this case is to have students examine dividend
25/26 Chapter 14 policy--both cash dividends and stock dividends--from the
Assignment: Answer the questions in the
DOUBL case. viewpoint of its effect on corporate share prices.
E
SESSIO
N

Session Case: Green Technology Solutions 1 B&E, This case is typical of the kind of thinking that lies behind the stock
27 Chapters 18 versus bond financing decision. It gives the student an opportunity
Assignment: Answer the questions in the & 20 to discover the kinds if factors that affect the decision, and it
case.
provides a useful vehicle for summarizing considerations in long-
term financing decisions.

Session Case: Eastside Communications 1 B&E, Although this is a relatively simple case, it is used to introduce the
28 Chapter 19 subject of leasing to the students. The session is used to discuss
Assignment:
various aspects and concepts in leasing including both the lessor and
lessee's perspectives.

Session Mega Quiz 1 Assigned Course Review and Reflection

Joint Chapters
Session Assignment: Reflect on the course and be
Covered
prepared.