Corporate Finance

Module

Contents

Sessions

Marks

I

Overview of Financial Management:

·          Meaning, Objectives, Scope, Role and Functions of Financial Management (Financial Decisions).

·          Financial Goal - Profit Maximization versus Shareholders’ Wealth Maximization.

Time value of Money: (theory and numerical)

·          Concepts, Compounding, Discounting, Annuities.

Sources of Long-Term Finance:

·          Introduction to Equity Shares, Preference Shares and Debentures, Term loan.

Valuation of Bonds, Preference shares and Equity.

(Numerical)

10

25

II

Understanding Investment Decisions (Capital Budgeting Decisions):

·          Meaning, Features

·          Types and Importance of Investment Decisions

Ø  Discounted Cash Flow (DCF)

§   NPV, IRR, MIRR, PI, Discounted Payback

Ø  Non-Discounted Cash Flow Techniques

§   ARR, Payback period

Capital Rationing (theory and numerical)

Understanding Dividend Decision:

·          Dividend and dividend policy

·          Factors affecting dividend payout

·          Dividend payment models: (theory and numerical)

Ø  Dividend relevance model

§   Walter model

§   Gordon model

Ø  Dividend irrelevance model

§   MM model

Basics of Decision Tree Analysis (1-level and 2-level) (theory only)

10

25

III

Cost of Capital: (theory and numerical)

·          Significance, Concept of the Opportunity Cost of Capital

·          Component Costs of Capital - Cost of Debt, Preference Capital and Equity Capital

·          Weighted Average Cost of Capital (WACC)

Leverage: (theory and numerical)

·          Types of Leverage - Operating, Financial and Combined Leverage.

·          Point of indifference

Understanding Financing Decisions (Capital Structure Decisions): (theory and numerical)

·          NI Approach

·          NOI Approach

·          MM Theory with and without Taxes

12

25

IV

Working Capital Management:

·          Concepts of Working Capital.

·          Operating Cycle.

·          Determinants of Working Capital.

·          Estimating Working Capital Needs. (theory and numerical)

·          Working Capital Finance Policies.

Ø  Matching approach, conservative approach, aggressive approach.

Cash Management: (Theory and Numerical)

·          Need for Cash Management.

·          Cash Management Cycle.

·          Cash Forecasting Through Budgeting.

·          Determining the Optimum Cash Balance under Certainty (Baumol’s Model) and Uncertainty (The Miller-Orr Model).

Receivables Management:

·          Nature and Goals of Credit Policy

·          Credit Policy Variables(theory and numerical)

13

25

V

Application:

·          Select suitable organization and study:

·          The role and functions of Finance department;

·          Select Scrip or bonds and do the valuation of its Securities;

·          Study the investment decisions, working capital policy and cash budgeting etc.

15

Nil