Financial Management I

1. Introduction to Financial Management

suresh.suralkar@gmail.com, Phone: 40434399

 Evaluation

• Class Participation & Attendance 10%

• Group Assignment: Gr. of 5, Class Presentation 10%

• Individual Assignment: Solve and submit in handwritten one

question paper of a previous year (as per list) 15%

• Written Test (During last week of August, 2010) 15%

• Final Exam (30% objective, 50% numerical & 20% theory)

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 Class Presentation Schedule
Student Roll Nos. Case / Chapter Date
1–5 Case 1: Modi Rubber vs. Financial Institutions 30.6
6 – 10 Ch. 1 & 2: Intro. to FM, Overview of Financial Markets 7.7
11 – 15 Case 2: Essar Steel: Defaulting on Debt Repayment 14.7
16 – 20 Ch. 3 & 4: Sources of Long Term Finance, Raising Long Term 21.7
Finance
21 – 25 Case 3: Reliance Petroleum’s TOCD (A) 28.7
26 – 30 Ch. 5 & 6: Intro. to Risk and Return, Time Value of Money 4.8
31 – 35 Case 4: Reliance Petroleum’s TOCD (B) 11.8
36 – 40 Ch. 7 & 8: Valuation of Securities, Cost of Capital 18.8
41 – 45 Case 5: Cost of Capital at Ameritrade 25.8
46 – 50 Ch. 9 & 10: Basics of Capital expenditure decisions, Analysis of 1.9
Project Cash Flows
51 – 55 Case 6: Valuing Sify’s Acquisition of IndiaWorld 8.9
56 – 60 Ch. 11: Risk Analysis and Optimal Capital Expenditure 15.9
Decisions, Case 7: Financial Management at Bajaj Auto
 Individual Assignment
Solve and submit in handwritten one question paper of a
previous year. Do not copy from others. You can take help
from friends or faculty for understanding. But solve and
submit yourself. Submission up to Sept 15, 2010.
Student Roll Nos. Question Paper
1–5 2004
6 – 10 2004 Make-up
11 – 15 2005
16 – 20 2005 Make-up
21 – 25 2006
26 – 30 2006 Make-up
31 – 35 2007
36 – 40 2007 Make-up
41 – 45 2008
46 – 50 2008 Make-up
51 – 55 2009
56 – 60 2009 Make-up
 Course Content - Syllabus
Sr Title ICMR Ch. PC Ch. IMP Ch.
1 Introduction to Financial Management 1* 1 1
2 Overview of Financial Markets 2* 2 -
3 Sources of Long-Term Finance 10* 17 20, 21
4 Raising Long-term Finance - 18* 20, 21, 23
5 Introduction to Risk and Return 4* 8, 9 4, 5
6 Time Value of Money 3* 6 2
7 Valuation of Securities 5* 7 3
8 Cost of Capital 11* 14 9

9 Basics of Capital Expenditure

Decisions 18* 11 8

10 Analysis of Project Cash Flows - 12* 10, 11

11 Risk Analysis and Optimal Capital

Expenditure Decision - 13* 12
*Book preference 2 / 53
 Introduction to Financial Management

Reference Books

1. Financial Management, ICMR Book, Chapter 1

2. Financial Management, Prasanna Chandra, 7th Edition,

Chapter 1

3. Financial Management, I. M. Pandey, 9th Edition,

Chapter 1

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Syllabus - Introduction to Financial Management

1. Objectives

2. Functions and Scope

3. Evolution

4. Interface of Financial Management with Other

Functional Areas

5. Environment of Corporate Finance

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 1. Objectives
• For finance Professions
• For non-finance professionals: every function is
associated with money e.g. R&D, Engineering /
Technology, Operations, Marketing, Purchasing, HR
• .
Money
Salary, Rent, Electricity, Product
Manpower
Machinery Maintenance Expenses Services

• Liquidity – Profitability Trade-off

• Performance Evaluation / Improvement:
Ratios, Stock Returns
• Business Modeling & Simulation
• Optimization of Resources
• Social Benefits, especially PSUs
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 2. Functions and Scope (contd.)

Board of Directors

Managing Director

CFO COO CTO or CMO or

Purchase HR
or Finance or Operations Technology Marketing
Manager Manager Manager Manager Manager Manager

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 2. Functions and Scope (contd.)

Chief Financial Officer

or Finance Manager

Treasurer Controller

Cash Credit Financial Cost

Manager Manager Accounting Accounting
Manager Manager
Capital Fund Data
Tax
Budgeting Raising Processing
Manager
Manager Manager Manager
Portfolio Internal
Manager Auditor
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 2. Functions and Scope
Balance Sheet
Equity Fixed
Assets

Debt… Current
Assets…

• Mobilization of Funds (Raising Capital)

• Deployment of Funds

• Control over the use of funds

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 3. Evolution
• Historical
• 20th Century growth
1. Traditional Phase: up to 1940
Capital raising, business expansion, M&As, liquidation
2. Transitional Phase: 1940 and 1950s
Focus on day to day issues, WCM
3. Modern Phase: Mid 1950s onwards
Use of quantitative methods and Analytical, focus on
use of funds to shareholders’ wealth creation, Capital
Budgeting, Asset pricing theory, Capital structure
theory, Efficient market theory, Option pricing theory,
Agency theory, Valuation models, Dividend policy,
WCM, Financial Modeling, Behavioral Finance… 10 / 12
 4. Interface of Financial Management with
Other Functional Areas
Board of Directors

Managing Director

CFO or COO or CTO or CMO or

Purchase HR
Finance Operations Technology Marketing
Manager Manager Manager Manager Manager Manager

• Finance – Economics, Accounting, Production, Purchase, Marketing

• Top Management – Finance
• Other Challenges: Treasury, Forex, Optimum debt / equity, Share
Prices, Management control
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 5. Environment of Corporate Finance

• External Environment: Global, National, Sectoral, Legal

• Forms of Businesses

– Proprietary

– Partnership: 2 or more up to 50 members.

– Public Limited Companies: More than 50 members.

• Regulatory Framework

– Companies Act 1956.

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