Course Contents
Unit 1: Introduction 4 hours
Meaning of finance; Basic areas of finance; Finance functions; Finance in the organization structure of a firm; Forms of business organizations; The goals of financial management; Relationship with other functional departments; Career in finance.
Unit 2: The Financial Environment: Markets, Institutions, Interest Rates and Taxes
5 hours
Financial markets: concept and types; Financial institutions: concept, role in funds transfer, and types; Interest rates: level of interest rate, determinants of market interest rates, the term structure of interest rate and yield curve; Taxes: corporate tax, marginal tax and average tax.
Unit 3: Financial Statement Analysis 6 hours
Financial statements: balance sheet, income statement and cash flows statement; Modifying financial data for managerial decisions: net cash flows, operating assets and operating capital, net operating profit, free cash flows, market value added and economic value added; Financial analysis: types of ratios, Du-Pont identity, use and limitation of ratio analysis; Common-size financial statements.
Unit 4: Risk and Return 6 hours
Concept and measurement of return: rupee return, percentage return, average return, expected of return, required rate of return, nominal and real rate of return; Concept and measurement of risk: concept, types and measures of risk; Portfolio risk and return: concept of portfolio, portfolio risk and portfolio return, calculation of portfolio risk and return; Capital assets pricing model: estimation of required rate of return, the security market line.
Unit 5: Time Value of Money 5 hours
Future value and compounding: single period and multiple period, compound interest; Present value and discounting: single period and multiple period; Present value versus future value; Determining the discount rate; Finding the number of periods; Future value and present values of multiple cash flows; Present value for annuity; Annuity payments; Finding the number of payments; Finding the rate; Future value for annuity; Annuities due; Perpetuities: present value of perpetuity; The compounding rates: the effect of compounding periods; Effective annual rate and annual percentage rate; Amortization of loan.
Unit 6: Bond and Stock Valuation 8 hours
Concept and features of bond; Bond valuation: perpetual bond, zero coupon bond, coupon bond with a finite maturity, bond valuation with semi-annual interest; Discount and premium bond; and Bond yields: rate of return, current yield and capital gain yield, yield to maturity, Yield on call.Features of common stock; Cash flows from common stock; Stock valuation for definite holding period; Valuation of stock for indefinite holding period: zero growth, constant growth and non-constant growth; Features of preferred stock; Valuation of preferred stock.
Unit 7: Cost of Capital 4 hours
Concept and uses of cost of capital; Cost of equity: the dividend growth model approach, the SML approach; Cost of debt and preferred stock; the weighted average cost of capital: the capital structure weight; and marginal cost of capital.
Unit 8: Capital Investment Decisions 10 hours
Concept of investment decisions; Generating investment project proposal; Process of capital budgeting decision; Classification of capital projects; Project cash flows: relevant cash flows, the stand-alone principle; Incremental cash flows: sunk cost, opportunity cost, net working capital, financing costs and other issues; Investment criteria: net present value, the payback rules, discounted payback period, the average accounting rate of return, the internal rate of return, and profitability Index.
