Professional Documents
Culture Documents
S T R A T E G I C F I N A N C I A L M A N A G E M EN T (C - 3 )
G RI D WEIG HTAG E
PART-A
15%
Finance, Fin ancial Analysis and Financial Strategy Formulation
PART-B
15%
Working Capital Management
PART-C
15%
Valuation of Securities
PART-D
25%
Cost of Capital, Capital Structure and Financing Decisions
PART-E
15%
Business Valuations, Mergers & Acquisitions and Dividend Policy
PART-F
15%
Treasury Function
To t a l 100%
2
PART-C
VALUATION OF SECURITIES
Gross and net realized returns, and the
realized return for a bond over a holding
period including reinvestments
Spread of a bond, and how a spread is
derived from a bond price and a term
structure of rates
Bonds yield-to-maturity (YTM) to bond
pricing
Bonds YTM given a bond structure and
11. Returns, Spreads and price
Yields Price of an annuity and a perpetuity
Relationship between spot rates and YTM
Coupon effect and the relationship between
coupon rate, YTM, and bond prices.
Decomposition of P&L for a bond into
separate factors including carry roll-down,
15
rate change, and spread change effects
Most common assumptions in carry roll-
down scenarios, including realized forwards,
unchanged term structure, and unchanged
yields
12. The Valuation of Long Valuation concepts
Term Securities Bonds valuation: Perpetual bonds, bonds
with finite maturity, zero coupon bonds
Preferred Stock valuation
Common Stock valuation
Dividend discount models (no growth,
constant growth and phased growth)
Earnings Multiplier approach
Rates of return (Yields): Common Stock,
Preferred Stock, Bonds (YTM, YTC)
PA R T- D
COST OF CAPITAL, CAPITAL STRUCTURE AND FINANCING DECISIONS
13. Risk and Return Defining risk and return
Measures of risk and return
Using probability distribution to measure
expected return and risk
Attitude towards risk
Risk and return in a portfolio context
Systematic and Unsystematic risk
Diversification
The Capital Asset Pricing Model (CAPM)
The Efficient Market Hypothesis, forms of
market efficiency
14. Operating and Financial Concept of Leverage
Leverage Operating Leverage
Operating Break Even Analysis
25
Degree of Operating Leverage and Business
Risk
Financial Leverage
EBIT-EPS Analysis
Degree of Financial Leverage and Financial
Risk
Total Leverage
Cash Flow ability to service debt
15. Capital Structure Capital Structure Concept and Overview
Net Operating Income approach
Traditional approach
The total value principle
Presence of market imperfections and
incentive issues
3
The effect of taxes
Financial signalling
16. Cost of Capital Creation of value
Sources of finance
Determining component cost of funds
Determining component weights
Determining Overall Weighted Average Cost
of Capital (WACC)
Risk Adjusted WACC
17. Financing Equity Introduction to financing and sources of
Finance Finance
Criteria for selecting sources of finance
Equity Finance
Capital Markets and their types
Methods of issuing new shares
Right issues
Theoretical Ex-Right Price (TERP)
18. Financing Debt Finance Debt Finance: Security, Covenants
Types of Debt Finance
Interest rate risk and refinancing risk
exposures
Other sources of fin ance
Lease Vs Buy decisions
19. Financing Capital Changing Capital Structure
Structure Decisions Financing Mix and the cost of capital
Capital Structure - Traditional view
Capital Structure Modigliani and Millers
view
Homemade Leverage
Gearing and de-gearing of beta factors: Asset
betas, equity betas and debt betas
Real World practical implications
Taxes and Capital Structure
Agency theory, pecking order hypothesis,
information asymmetry, bankruptcy costs
PART-E
BUSINESS VALUATIONS, MERGERS & ACQUISITIONS AND DIVIDEND POLICY
20. Business Valuation Introduction to business valuation
Different valuation methods: Asset based
models, Market relative (Earning multiple)
models, Divided discount models, Free Cash
flow models FCFF,FCFE, Market value based
approach, Market value added (MVA),
Economic value added (EVA)
Valuation of intangible assets: Calculated
Intangible Value (CIV)
21. Financial and Strategic Types of Mergers/Acquisitions
Implications of Mergers Reasons for mergers or acquisitions
and Acquisitions The exchange ratio
15
Bootstrapping and post acquisition values
Defence against hostile takeover bids
Form of consideration for a takeover
Post-merger or post-acquisition integration
process
The role and scope of competition
authorities
Divestment
Management buyouts (MBOs), Leverage
buyouts (LBOs)
Exit Strategies
22. Dividend Policy and Dividend policy an introduction
decision making: Theory Passive versus Active Dividend policies
4
and Practice Irrelevance of dividend: Modigiliani and
Miller (MM) Hypothesis anmd model
Hamada equation
Relevance of dividends: Walters Model and
Gordans Model
Factors influencing dividend policies
Dividend stability
Administrative Considerations
Practical implications: Taxes, Clientele
effect, Bird in hand argument, Sign alling
effect
Dividend policies in practice
Stock dividends, Stock splits and share
repurchase as a part of dividend policy
Managerial considerations as to
dividend/share repurchase policy
PART-F
TREASURY FUNCTION
23. Treasury An Treasury - evolution, importance, theories,
Introduction functions, classification
Liquidity Management in Treasuries Cash
Forecasting
Banking Relationships
Credit Management
Treasury Products and Services
Risk management policy