Financial Management - MB25201

MB25201:

Financial Management

Course Objectives:

This course aims to impart a comprehensive understanding of the core financial functions in an organization, emphasizing value creation and efficient resource allocation. Students will explore decision-making tools related to investment, financing, working capital, and dividend distribution. Emphasis is laid on time value of money, capital budgeting, risk-return trade-offs, cost of capital, and modern capital market instruments. The course prepares students to make effective financial decisions under real-world constraints and uncertainties.

Foundations of Financial Management

Introduction, Nature and Scope of Financial Management – Objectives of Financial Management – Major Financial Decisions – Role of Finance Manager – Organization of Finance Functions – Time Value of Money – Valuation of Shares and Bonds – Risk and Return Analysis: Single Asset and Portfolio Context.

Investment and Capital Budgeting Decisions

Capital Budgeting: Concepts and Relevance – Identification of Cash Flows – Evaluation Techniques: Payback, ARR, NPV, IRR, Profitability Index (Problem) – Comparison of DCF and Non-DCF Methods – Cost of Capital: Specific Costs and Weighted Average Cost (Problem) – Application of Investment Appraisal Tools.

Financing Decisions and Capital Structure

Leverages – Operating and Financial Leverage (Problem) – Combined Leverage – EBIT-EPS Analysis – Indifference Point (Problem) – Capital Structure Theories: NI, NOI, MM Approach – Determinants of Capital Structure – Financial Planning and Strategy.

Dividend Policy Decisions

Dividend Policy: Importance and Issues – Relevance and Irrelevance Theories – Walter’s Model, Gordon’s Model, MM Hypothesis – Types and Forms of Dividends – Factors Influencing Dividend Decisions – Real-World Dividend Practices.

Working Capital Management

Working Capital: Concepts, Determinants and Estimation (Problem) – Operating Cycle – Receivables Management – Inventory and Cash Management – Working Capital Financing: Trade Credit, Commercial Paper, Bank Finance, Company Deposits – Liquidity vs Profitability Trade-offs.

Long-Term Financing and Capital Markets

Indian Capital Market Overview – Primary and Secondary Markets – Long-Term Sources: Equity, Debentures, Term Loans – Lease and Hire Purchase – Venture Capital and Private Equity – SEBI Regulations – Financing Strategies for Startups.

References:

1. I.M. Pandey, Financial Management, Vikas Publishing, 12th Ed., 2023.

2. M.Y. Khan & P.K. Jain, Financial Management: Text, Problems and Cases, TMH, 9th Ed., 2023.

3. Aswath Damodaran, Corporate Finance: Theory and Practice, Wiley, 4th Ed., 2014

4. James C. Van Horne, Fundamentals of Financial Management, PHI Learning, 14th Ed., 2021.

5. Brigham & Ehrhardt, Financial Management: Theory and Practice, Cengage, 15th Ed., 2022.

6. Prasanna Chandra, Financial Management, TMH, 10th Ed., 2022.

7. Srivastava & Mishra, Financial Management, Oxford University Press, 2nd Ed., 2019.

Course Outcomes

After completing this course, students will be able to:

● CO1: Demonstrate conceptual knowledge of financial management, time value of money, capital budgeting, capital structure, dividend policies, working capital management, and long-term financing options.

● CO2: Interpret and relate the objectives of financial management, risk and return analysis, capital budgeting techniques, leverage and capital structure theories, dividend policies, and the role of capital markets in a company's financial decisions.

● CO3: Apply financial management principles, time value of money concepts, and capital budgeting techniques to make informed investment, financing, and working capital decisions.

● CO4: Analyze financial data, including cash flows, leverage, and working capital components, to evaluate investment proposals, capital structure, and liquidity management strategies.

● CO5: Evaluate capital structure and dividend policy theories, working capital financing options, and long-term financing instruments to formulate a comprehensive financial strategy for a firm.

● CO6: Develop a financial management framework by integrating knowledge of investment, financing, and working capital decisions to create value, manage risk, and support the long-term growth of a business.