FIN 531 Financial Management

Program: MBA Nature of course: Core Instructor: Rishi Raj Gautam Trimester: 3 Credit Hour: 2

Course objective
The aim of this course is to familiarize students with an overview of the principles, methods and practices of financial decision making in firms.

Course Description
This course includes the nature of financial management: finance in organizational structure of the firm, value maximization goal as a financial decision criterion, financial functions and agency problems. Financial management concepts: financial statements and cash flows, time value of money; financial planning and forecasting: the financial plan, financial statement forecasting, the AFN formula and simple regression technique. Securities valuation: bond and stock valuation. Strategic investment decision making: estimation of cash flows, estimation of cost of capital, evaluation of cash flows. Strategic financing decision making: operating and financing leverage, EBIT-EPS analysis, breakeven and indifference charts. Dividend policy decision making: nature and types of dividend policy, determinants, stock dividends and stock splits.

Learning Outcomes
Upon completion of this course, you should be able to: Understand the basic nature of financial management. Discuss the various concepts of financial management including time value of money, cash flow, cost of capital, security valuation, and financial statements. Analyze the financial statements for financial planning and forecasting. Apply the techniques derived from the models and theories in preparing strategic investment and financial decisions. Describe the dividend policy of different types of organizations. Discuss and give examples of the wider aspects of financial management so as to include international considerations and the need to communicate decisions made to other members of a management team. Analyze the basic conceptual cases in finance.

Learning Activities and Procedures

Instructor decide on the teaching methods for this course, which may include lectures, case study, practical problems exercises, article review, project report writing and students presentations. The learning activities will be centered on the following activities: Class lectures, and case analysis and discussion Class presentation and discussion following the presentation Article review Quiz Project work Examination (Mid-term and final)

1|Page

Course Outline
The classes will be organized into following sections and subsections. Students are expected to read the topics prior to the class. 1. Nature of Financial Management Finance in organizational structure of the firm Value maximization goal as a financial decision criterion Finance functions Agency problems of stockholders vs. managers and creditors Text and supplementary Reading: Brigham and Ehrhardt (Chapter 1) Van Horne (Chapter 1) Paudel et al. (Chapter 1) Article 1: Pradhan, R.S. (2006), Financial Management Practices in Nepal: Research in Nepalese Finance. Kathmandu: Buddha Academic Enterprises. 60-89. 2. Financial Statements, Cash Flow, and Taxes Use of financial data for managerial decision MVA and EVA Taxes: average tax rate, marginal tax rate, corporate tax, and personal tax Text and supplementary Reading: Brigham and Ehrhardt (Chapter 3) Paudel et al. (Chapter) 3. Financial Planning and Forecasting Overview of financial planning Financial statement forecasting: percentage of sales method, AFN formula Simple regression method Text and supplementary Reading: Brigham and Ehrhardt (Chapter 14) Paudel et al. (Chapter 3) Case Study 2: Jones Electrical Distribution. 4. Time Value of Money Time line Present value and future value Annuity and perpetuity Amortized loan Text and supplementary Reading: Brigham and Ehrhardt (Chapter 2) Brealey, Myers & Marcus (Chapter 4) Van Horne (Chapter 2) Case Study 1: Bahadur Engineering Works (BEW)

2|Page

5. Security Valuation and Cost of Capital Bonds and their valuation Common stocks and their valuation Component cost of capital: debt, preferred stock and common stock Marginal cost of capital Weighted average cost of capital Text and supplementary Reading: Brigham and Ehrhardt (Chapter 6, 7 & 8) Paudel et al. (Chapter 7 & 8) Van Horne (Chapter 8)

6. Strategic Investment Decision Making Overview of capital budgeting decision Project classifications Estimation of cash flows Evaluation of projects: payback period, discounted payback period, NPV, PI, IRR and MIRR Comparison of projects with unequal lives Text and supplementary Reading: Brigham and Ehrhardt (Chapter 10 &11) Van Horne (Chapter 6) Paudel et al. (Chapter 6) 7. Strategic Financing Decision Making- Leverage and EBIT-EPS Analysis Operating and financial leverage EBIT-EPS analysis Break-even and indifference charts Text and supplementary Reading: Van Horne (Chapter 10) Paudel et al. (Chapter 9) 8. Dividend Policy Decision Making Dividend policy and Factors influencing dividend policy Dividend payment procedure, Dividend payout schemes Stock dividends, stock splits, stock repurchase and their impact in stock price and capital structure. Text and supplementary Reading: Brigham and Ehrhardt (Chapter 18) Van Horne (Chapter 11) Paudel et al. (Chapter 14) Article 2: Chen, J. & Dhiensiri, N. (2009). Determinants of Dividend Policy: The Evidence from New Zealand. International Research Journal of Finance and Economics. Vol. 34.

3|Page

Text Book
Brigham. E. F.. & Ehrhardt. M.C. (2008). Financial Management-Text and Cases. New Delhi: Cengage Learning India Pvt. Ltd.

References
Van Horn. J.C. (2002). Financial Management and Policy. (12th ed.). New Delhi: Pearson Education. Brealey,R.A., Myers S.C.. Marcus A.J. (2007). Fundamentals of Corporate Finance, McGraw Hill International edition. Paudel R.B. et al. (2007). Corporate Financial Management. Kathmandu: Ashmita Publication Articles and handouts/ tutorial provided by instructor.

Project Work
Project to be completed within stipulated time: During the trimester period, students have to complete project works assigned to them. The project should be completed before the mid-term exam. Those who failed to complete the project work within stipulated time shall be considered as "Not Qualified (NQ). Group Assignment: Students will be divided into groups to complete the project work. The faculty has made arrangements to guide them if required. Original Work: Project work should be completed with originality. The data and sources of data must be mentioned. Appropriate literature should be reviewed and bibliography must be completed. Each topic of the project work contains its subject matter. So you have to develop your own approach of finalizing the project. Presentation: Students are required to present their findings of project work in the class before mid-term examination.

Delivery of the Course

In delivering the courses, the faculty member will serve as a facilitator of learning. Students are advised to go through the suggested readings on the topic in advance and are required to participate actively in class. Similarly, the students will be expected to come to class having read all assigned readings and ready to share and discuss. There will be lectures by instructor, cases analysis, article review, exercises, quiz, home assignment, project work and presentation by the students. The faculty will provide regular feedback to students on their progress.

Evaluation Scheme
Following is the breakup of the internal assessment for this course. As per the rule of university, internal assessment has been given 60 percent weight in the final grading. The weight is distributed as follows: Activities / Criteria Weightage (%) 1. Class Participation and Attendance 10 2. Case Analysis and Presentation 20 3. Assignment and Articles Review 20 4. Project Work 20 4. Mid-tem Exam 30 Total 100

4|Page