1. Introduction to Financial Management
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Financial Management I 1. Introduction to Financial Management
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Transcript of 1. Introduction to Financial Management
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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)
50%
Class Presentation ScheduleStudent 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 Finance
21.7
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 Project Cash Flows
1.9
51 – 55 Case 6: Valuing Sify’s Acquisition of IndiaWorld 8.9
56 – 60 Ch. 11: Risk Analysis and Optimal Capital Expenditure Decisions, Case 7: Financial Management at Bajaj Auto
15.9
Individual AssignmentSolve 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
*Book preference
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
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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
• .
• Liquidity – Profitability Trade-off• Performance Evaluation / Improvement:
Ratios, Stock Returns• Business Modeling & Simulation• Optimization of Resources• Social Benefits, especially PSUs
Salary, Rent, Electricity, Maintenance Expenses
MoneyManpowerMachinery Services
Product
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2. Functions and Scope (contd.)
CTO or Technology Manager
HR
Manager
CMO or Marketing Manager
COO or Operations
Manager
CFO or Finance Manager
Purchase
Manager
Board of Directors
Managing Director
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2. Functions and Scope (contd.)
Chief Financial Officer or Finance Manager
Credit Manager
Cost Accounting
Manager
Fund Raising
Manager
Treasurer
Cash Manager
Controller
Internal Auditor
Capital Budgeting Manager
Data Processing Manager
Tax Manager
Financial Accounting
Manager
Portfolio Manager
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2. Functions and Scope
Balance Sheet
• Mobilization of Funds (Raising Capital)
• Deployment of Funds
• Control over the use of funds
• Risk-return trade-off
Equity Fixed Assets
Debt… Current Assets…
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3. Evolution• Historical• 20th Century growth1. Traditional Phase: up to 1940
Capital raising, business expansion, M&As, liquidation2. Transitional Phase: 1940 and 1950s
Focus on day to day issues, WCM3. 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…
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4. Interface of Financial Management with Other Functional Areas
• Finance – Economics, Accounting, Production, Purchase, Marketing• Top Management – Finance• Other Challenges: Treasury, Forex, Optimum debt / equity, Share
Prices, Management control
CTO or Technology Manager
HR
Manager
CMO or Marketing Manager
COO or Operations Manager
CFO or Finance
Manager
Purchase
Manager
Board of Directors
Managing Director
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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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