MBA Executive Course

Business Finance II
Session 1
 Weekly Review – AKD Securities
• The supplementary finance bill clearly reflects authorities’ determination to clamp
down the imports and promote local manufacturers, targeting to raise PkR343bn .
• In addition to this, the tabled SBP bill has largely catered to IMF recommendations. i)
• PSX intending to promote retail trade in debt securities market,
• Inflow of US$300m from ADB for energy sector reforms,
• Fertilizer sector moving up on the priority list of gas supply,at par with export sector,
• T-bills yields witnessing model fall after SBPs 63 day OMO,
• SBP FX reserves falling US$298mn,
 Course intro

• 12 sessions.
• Textbook: Financial Management: Theory, Practice. Brigham and Michael Ehrhardt.
• Articles/reports/cases
• Application of Concepts: Group projects, Presentations
• Assignments
• Quizzes
• Marks distribution
Marks Distribution

• Home Assignments 10 marks

• Application of concepts 10 marks
• Quizzes 10 marks
• Exam Paper Mid 30 marks and final 40
 Session 1

• Reconnecting with Accountancy

• Dynamic world of Finance

• Risk and return analogy

• Financial Management and Business Ethics – Malice of capitalizing on COVID

Sales 1000 Depreciation 1000
allowance

Gross Profit 300 Salaries Expense 150

Building 5000 Dividend earning 50

Bank Loan 4200 cash 200

Retained Earning 400 Goodwill 1000

Prepaid Expense 300 Inventories 700

Cost of goods sold 700 Net Profit 200

Interest Payable 50 Capital ?

Finance - Objective

Primary objective of management should be

to maximize stockholders’ wealth
company’s intrinsic value and stock price.
 Business Risk

• Risk: Actual outcome Vs. Expected outcome

• Investment risk: Measured through Variability of Possible outcome.

Greater variability, greater risk

• Risk is avoidable only in Risk free Investments

• For other Investments Risk is unavoidable.
• Risk, reward relationship
 Reducing Risk

• Risk averse Vs. Risk taker

• Systematic Risk (Market Risk) : Unavoidable

• Unsystematic Risk (Firm specific): Avoidable through diversification

• Investor should be rewarded for Systematic risk

Measuring Risk

• Standard Deviation Standalone risk

• Coefficient of Variance Risk, return correlation
• Beta Going out comparing with market
• CAPM Required rate of return
• SML Relationship between risk & CAPM
• Alpha Abnormal profit & CAPM
• Coefficient of Correlation Comparing two or more dataset