UNIVERSITY OF GUJRAT FACULTY OF MANAGEMENT AND ADMINISTRATIVE SCIENCES

I.

COURSE INFORMATION
Course Name: Financial Management Course Code: MGT-401 Credit Hours: 3 Prerequisite: Introduction to Business, Fundamentals of Accounting

II.

COURSE DESCRIPTION

The course provides an understanding of what do we mean by funds, how we have to manage our funds, how we can generate funds, how can we allocate funds to different departments in organization, how to invest excess funds in profitable opportunities. The course is needed for management/business students because they have to work in organizations and fund management process in a critical part in every organization. The course comprises didactic lectures, two assignments and a Project. Students will be given real time business examples about fund management process that is involved in different organizations.

III.

OBJECTIVES

At the end of this course, the students will be able to: Explain what Financial Management is Explain why we need to study Financial Management Describe the difference between money and capital markets Differentiate between debt and equity Analyze different companies financial position by using different bond and stocks evaluation techniques

IV.

LEARNING OUTCOMES

This course develops the following competencies in the students. An ability to understanding different financial statements An understanding of different financial markets An ability to evaluate cheaper sources of financing and risk inherent in that source An ability to recommend optimal capital structure of any company

V.

COURSE CONTENTS
Introduction to Financial Management Fundamental Concepts in Financial Management Financial Assets Investing in Long Term Assets Capital structure and Dividend Policy

VI.

EVALUATION
10% 10% 5% 25% 50% 100%

Assignments: Project: Quizzes: Mid Term Examination: Final Examination: Total:

VII.

TEXT BOOKS
James C. Van Horne; Fundamentals of Financial Management; 12th Edition

VIII.

REFERENCE BOOK/MATERIAL

Managerial Finance, by Lawrence J. Gitman.

DETAILED COURSE OUTLINE

Week 1 Topic Introduction to Financial Management What do we understand by Financial Management? Why to Study Financial Management? New Trends in Financial Management Fundamental Concepts in Financial Management Time Value of Money Future and Present Values of a single amount Future and Present Values of an Annuity Perpetuity and Different types of Compounding EAR Applications of TVM

2-3

4-5

Risk and Return Define risk and return Attitudes towards risks Measuring the risk and return of single asset Risk and return of portfolio Diversification CAPM Financial Assets Interest Rates Cost of Money Interest rate levels Determination of interest rates Factors Influencing Interest Rates Bonds and their Valuation What are bonds Who issues bonds Different types of bonds Bond Valuation Stocks and their Valuation Legal rights and privileges of common stockholders Types of common stocks Common stock valuation Constant growth stocks Revision and Mid Term Examination Capital Budgeting Cash flows Capital budgeting process Generating investment proposals Estimating initial investment Estimating initial, operating and terminal cash flows

8 9

10

The Basics of Capital budgeting Project Classification The Net Present Value (NPV) Criterion Internal Rate of Return (IRR) Modified Internal Rate of Return (MIRR) Payback Period Conclusion on Capital Budgeting Methods 11-12 Investing in Long Term Assets The Cost of Capital An overview of Weighted Average Cost of Capital Cost of Debt Cost of Preferred Stocks Cost of retained Earnings

 Cost of New Common stock Composite or Weighted Average Cost of Capital Factors that affect WACC 13-15 Capital structure and Dividend Policy Capital structure and Leverage The target capital structure Business and Financial Risk Determining the optimal capital structure Distributions to shareholders: Dividends and share Repurchases Dividend versus Capital gains: What investor prefer Dividend Policy Issues 16 Presentations and Revision 17 18 Preparation Week Final Examination