Financial Management II
Financial Management II
Financial Management II
:
Semester II Sessions : 33
Class of : 2010 Credit :3
Objective
To provide tools for financial analysis, understanding of capital budgeting decisions, capital structure & dividend decisions and
working capital management.
Financial Management and Policy, 10e James C Van Horne - Prentice-Hall, India
Essentials of Corporate Finance, 4e Financial Ross, Westerfield, and Jordan (2003, McGraw Hill
Management: Theory and Practice, 4e Publishing) . Dr Prasanna Chandra - Tata McGraw
-Hill
Detailed Syllabus
Financial Forecasting: Sales Forecast Preparation of Pro-Forma Income Statement and Balance
Sheet -Growth and External Funds Requirement - EFR
Leverage: Measuring and analyzing the implications of Leverage -Operating Leverage,
Financial Leverage and Total Leverage.
Capital Structure Theories: Net Income Approach -Net Operating Income Approach -
Traditional Approach - Modigliani-Miller Model (MM), Miller Model -Criticisms of MM and
Miller Models -Financial Distress & Agency Cost - Asymmetric Information Theory.
Capital Structure Policy: Business & Financial Risk -A Total Risk Perspective -Business &
Financial Risk -A Market Risk Perspective Determinants of Capital Structure Decision Approach
to Estimating the Target Capital Structure -Variations in Capital Structures, EBIT / EPS Analysis
and ROI / ROE Analysis
Dividend Policy: Traditional Position - Walter Model -Gordon Model -Miller-Modigliani
Position - and Rational Expectations Model.
Estimation of Working Capital Needs:
Objectives of Working Capital (Conservative vs Aggressive Policies), Staticvs Dynamic View of
Working Capital -Factors Affecting the Composition of Working Capital Independence among
Components of Working Capital - Operating Cycle Approach to Working Capital.
Inventory Management: Nature of Inventory and its Role in Working Capital -Purpose of
Inventories -Types and Costs of Inventory Inventory Management Techniques - Pricing of
Investments - Invent ory Planning and Control.
Receivables Management: Purpose of Receivables - Cost of Maintaining Receivables
-Credit Policy Variables (Credit Standard, Credit Period, Cash Discount, Collection Program),
Credit Evaluation -and Monitoring Receivables.
Financing Current Assets: Behaviours of Current Assets and Pattern of Financing Accruals
-Trade Credit -Provisions -Short Term Bank Finance -Public Deposits, Commercial Paper -
Factoring
Treasury Management And Control -Cash Management: Meaning of Cash - Need for and
Objectives of Cash Management -Cash Forecasting and Budgets - Cash Reports -and Efficient
Cash Management. Multinational Financial Management-Needs of Importer, Needs of Exporter
in terms of Foreign exchange -Bid ask rates, Spot -TT buying -selling Forward rates-Cross rates
roll of Banks/Forex dealers
Introduction to Cost Concepts: Interface of Financial Accounting with Cost Accounting, Cost-
Types of costs-Historical Costs, Future Costs, Standard Costs, Period Cost, Prime Cost, Direct &
Indirect Cost, Opportunity Cost, Imputed Cost, Programmed Cost, Joint Cost, Sunk Cost,
Discretionary Cost, Out of -Pocket Cost, Differential Cost, Capacity Cost, Conversion Cost,
Committed Cost -Cost Unit Cost Center.
Cost Accounting: Cost accumulation -cost object -cost assignment -cost classification cost
tracing - cost allocation - cost application cost driver - variable cost and fixed cost - costs in
financial statements -mechanics of cost accumulation -cost behaviour and cost estimation -
techniques of costing Preparation of Cost sheet: Prime Cost, Overheads, Cost sheet
Cost -Volume -Profit Analysis: The Relationship of Costs and Profits with Volumes - Use of
CVP Analysis - Marginal Costing Marginal Costing and Absorption Costing Distinguished
-Break-even Point Contribution Margin Approach.
Decisions involving Alternate choices: Nature of managerial decision making - characteristics
of cost for decision making -concept of differential costs - decision to make or buy decision to
accept a special order -decision to drop a product line -decision regarding equipment
replacement -decision regarding selling or further processing.
Current Developments Cases and Exercises:
← Hero Honda’s Dividend Policy
← Intel: Managing Working Capital
← Dressen (Abridged) (A)
← Allied Irish Banks: The Currency Derivatives Fiasco
← The Fall of United Western Bank
Dividend Policy 1
Cases on Dividend Policy 1
Estimation of Working Capital 2
Needs
Inventory Management 2
Receivables Management 2
Cases on Working Capital 22
Management, Inventory
Management and Receivables
Management Financing Current
Assets
Treasury Management And Control 1
Introduction to Cost Concepts 1
Cost Accounting 2
Preparation of Cost sheet 2
Cost -Volume -Profit Analysis 2
Decisions involving Alternate 3
choices
Current Development 1
Total 33