INDIAN INSTITUTE OF MANAGEMENT, LUCKNOW

PGPWE
FINANCIAL MANAGEMENT
FN-1303
TERM – IV, 2023-24

Faculty Prof Jalaj Pathak

Number of 1
sections
Room No 208
Telephone 6669
Mail ID Jalaj.pathak@iiml.ac.in

COURSE DESCRIPTION

‘Financial Management’ is an introductory course in Finance This course focuses on the value of the firm and also the
factors that influence this value, like various risks the firm faces while selecting a new project, changes in level of debt of
the firm to mention a few. It also gives an introductory view of working capital management. Derivatives and lease
financings methods are also discussed to give a fair view of instruments used by investors and firms to maximize value.
This course is taught using exercises and cases. It is important that the student reads the intended reading material before
coming to the class thoroughly. We repeat, students have to read the relevant reading material before attending the
class! The students are expected to participate in all of the class room discussions.
COURSE OBJECTIVE

Every decision that a firm makes has a financial management component to it and the course attempts to stress the need
for adequacy, appropriateness and responsiveness of such decisions. The Purpose of the course is to:

 Provide students with comprehensive knowledge of core finance theories and models.
 Provide a strong theoretical and analytical base that is grounded in real world application using cases and
exercises. Among the topics covered in the course are: Investment Decisions, Financing Decisions, Dividend
Decisions, Risk and Return, Working Capital Management, Lease/Hire Purchase and Financial Derivatives.
 Develop analytical and critical thinking skills of students in financial decision making and make use of
spreadsheets in financial modeling.
 Recognize and resolve social and ethical issues and agency costs in Strategic financial decision making.
 Enhance communication skills through case analysis, written reports and presentations.

COURSE LEARNING OUTCOMES

By the end of the course the student should be able to:

1) Understand and analyse the relationship between strategic decision making and corporate financing decisions.
2) Explain how to value capital investments and use the key capital budgeting techniques.
 3) Understand the mathematics of risk and return and how risk affects the value of the asset in equilibrium and also
explain the characteristics of derivative assets.
4) Learn to compute the cost of capital and discuss the theoretical framework of informational efficiency in financial
markets and understand the trade-off firms face while choosing capital structure.
5) Understand and explain the relevance, facts and role of the dividend policy.
6) Should be able to calculate Working Capital requirements and Understand how financial decisions can contribute
to firm value
7) Understand financial modelling and real world application of core concepts of finance.
8) Understand strategic financial decision making in a global context.

ALIGNMENT OF PROGRAM OBJECTIVES & COURSE LEARNING OUTCOMES

Programme Objectives Course Learning (CL) outcomes

1 To develop an understanding of knowledge and skills in key

functional areas CL 1

2 To integrate and apply business knowledge

CL 2-8
3 To develop a global perspective CL-8

4 To assimilate diverse knowledge from experienced peer groups CL 2 - 6

5 To master critical analysis and integrate theory and practice CL 1 and 7

6 To focus on general management and leadership skills from a senior CL 2 and 8

management perspective

REQUIRED COURSE MATERIALS AND READINGS

Basic Text (BT)

 Richard A. Brealey and Stewart C. Meyers, Franklin Allen and Edmans, Principles of Corporate Finance, McGraw Hill.
14th Edition (BM)
 Pandey, I.M, Financial Management, Pearson, 12th Edition

Reference books
 Ross, S. A., R W Westerfield, J. Jaffe & B.D. Jordan. Corporate Finance, Tata McGraw Hill. Latest Edition (RWJ)
 Lawrence J Gitman, Principles of Managerial Finance, Pearson Education..
 Benninga, Simon, Principles of Finance with Excel, Oxford, Oxford University Press.
 Damodaran, Aswath Corporate Finance: Theory & Practice, John Wiley
EVALUATION

 Exams: There will be two examinations: Mid Term Examination and End Term Examination
 Quizzes: To be announced by the faculty.
 Group Assignments/ Project Report: Each student will be assigned to a group. More details of this group
project report will be posted on and will also be discussed in class.
  Class Participation: Students are responsible for all materials covered and readings assigned. Be
prepared to answer certain questions that had been emphasized in prior classes or from the reading
assignments.

GRADING SCHEME

Mid Term Exam 30

30
End Term Exam
40
Quizzes/Assignments/
Group Project/CP
100
Total

ACADEMIC DISHONESTY

Academic dishonesty or misconduct is cheating that relates to an academic activity. It is a violation of trust between
the Institute and its stakeholders. Plagiarism, fabrication, deception, cheating and sabotage are examples of
unacceptable academic conduct. Please consult the PGPWE Manual for the section on academic dishonesty

COURSE SCHEDULE: EACH SESSION OF 90 MINUTES

Sessions Details Case

1 Financial Management: Functions and Objectives
Read: Chapter 1(BM), Chapter 1 (IMP)
Time Value of Money
Read: Chapter 2(BM), Chapter 2 (IMP)
2 Valuation of Bonds and Stocks
Read: Chapters 3 & 4 (BM), Chapters 3 & 4 (IMP)
3 Risk, Return and CAPM
Read: Chapters 7 & 8 (BM), Chapters 4 & 5 (IMP)
4-5 Cost of Capital : Approaches & WACC Case 1: Nike Inc.
Read: Chapters 7 & 8 (BM), Chapters 6 & 9 (IMP) Case 2: Marriott Corporation
(Abridged)
6-8 Long term Investment Decision analysis- NPV, IRR, Payback Case 3: Super Project.
period, and Profitability Index : Concepts
Read: Chapters 5, 6 & 11 ( BM), Chapters 10, 11 and 12 (IMP) Case 4: New Heritage Doll
Long term Investment Decisions : Applications Company: Capital Budgeting
Read: Chapters 5, 6 & 11 (BM), Chapters 10, 11 and 12 (IMP)
9 Complex Investment Decisions ( Investment decisions under Exercise
inflationary conditions and adjustment for inflation)
Risk Analysis in Long term investment decisions
Read: Chapter 9 & 10 ( BM)
10 Market Efficiency and Financing Decisions
Read: Chapter 13 (BM), Chapter 19 (IMP)

MID TERM EXAM

11-13 Financing decisions Case 5: Continental Carriers.
a) Financial and operating Leverage Case 6: American Home
b) Capital structure theories Products Corporation.
c) Capital Structure planning and policies
Read: Chapters 17, 18, 23 & 24 (BM), Chapters 14 & 15 (IMP),
14 Dividend Theories and Policies
Read: Chapters 16 ( BM), Chapter 17 & 18 (IMP)
15 Lease Financing vis-à-vis Borrow & Buy
Read: Chapter 26 (BM), Chapter 22 (IMP),
16-18 Short term financing and Working capital management Case 7: Dell’s Working Capital
Read: Chapters 30 &31 (BM), Chapters 27, 28, 29, 30 & 31 Case 8: Hampton Machine
(IMP), Tools
19 Integrative Case Case 9: Financial Policy at
Apple

20 Introduction to Financial Derivatives Exercise

END TERM EXAM