Syllabus
Objective
Contents
1. Financial Management and Financial Analysis
i. Introduction to Financial Management Function
a. Objective and scope of financial management
b. Role and purpose
c. Financial management environment
d. Functions of finance executives in an organization
e. Financial distress and insolvency
ii. Financial Analysis through Ratios
a. Users of the financial analysis
b. Sources of financial data for analysis
c. Calculation and interpretation of ratios:
-Analysing liquidity
- Analysing leverage
- Analysing solvency
- Analysing efficiency / activity
- Analysing profitability
d. Limitations of ratio analysis
2. Financing Decisions
i. Sources of Finance
a. Different sources of Finance, Characteristics of different types of long term debt and equity finance, method of raising long term finance
b. Different Sources of short term finance
c. Internal fund as a source of finance
d. International sources of finance
e. Other sources of finance- Sale and lease back, Convertible debt, Venture capital, Grants etc.,
ii. Cost of Capital
a. Significance of cost of capital
b. Factors of cost of capital
c. Measurement of costs of individual components of capital
d. Weighted average cost of capital (WACC)
e. Marginal cost of capital
f. Effective interest rate
iii. Capital Structure Decisions
a. Significance of capital structure
b. Determinants of capital structure
c. Capital structure planning and designing
d. Designing optimum capital structure
e. Theories of Capital Structures and value of the firm - relevancy and irrelevancy of capital structure
f. EBIT-EPS Analysis, Breakeven - EBIT Analysis
g. Under / Over Capitalisation
iv. Leverages
a. Types of Leverages - Operating, Financial and Combined
b. Analysis of Leverages
3. Capital Investment and Dividend Decisions
i. Capital Investment Decisions
a. Objectives of Capital Investment decisions
b. Methods of Investment appraisal
-Payback period, Discounted payback period
-Accounting Rate of return (ARR)
- Net Present Value (NPV)- The meaning of NPV, Strengths and limitations of NPV method, The working capital adjustment in NPV Analysis, Capital Rationing, Equivalent Annual Costs
- Internal Rate of Return (IRR) - Limitations of the IRR Method, Multiple IRRs
- Modified Internal Rate of Return (MIRR) - Definition and Exploitation of MIRR, The process for calculating MIRR, Strengths of the MIRR Approach
- Profitability Index
ii. Adjustment of Risk and Uncertainty in Capital Budgeting Decision
a. Probability Analysis
b. Certainty Equivalent Method
c. Risk Adjusted Discount Rate
d. Scenario Analysis
e. Sensitivity Analysis
iii. Dividend Decisions
a. Basics of Dividends
b. Forms of Dividend
c. determinants of Dividend
d. Relevancy and irrelevancy of Dividend policies - Traditional approach, Walter's model, Gordon's Model, Modigliani and Miller Hypothesis
4. Management of Working Capital
a. The management of working capital - Liquidity and Profitability
b. The working capital financing decisions - Primary and Secondary Sources of Liquidity
c. The working capital cycle (operating cycle) Effectiveness of working capital based on its operating and cash conversion cycles
d. Assessment of working capital requirement
e. Management of Accounts receivables
f. Factoring and forfaiting
g. Management of Accounts payables
h. Management of Inventory
i. Management of Cash, Treasury management
j. Banking norms of working capital finance