Courseoutline FMII

Course Identification:
Course Title: Financial Management II

Course Code: ACFN 3042
Credit Hours: 3
ETCTS 5
Prerequisite: Financial management I (ACFN 3031)
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Course Description
This course builds on the knowledge and skills acquired in Financial Management I.
In this course students should attain a clear, basic understanding of the essentials of
financial decision making. Emphasis is given to the underlying principles of
corporate finance and their associations to the decision-making framework faced by a
financial manager who is charged with maximizing shareholders’ wealth. A great
deal of the material in this course is presented so that the fundamental concepts of
financial decision making can be related to personal financial situations. The course
emphasizes on capital budgeting and long-term financial decisions. It explains how
top management conducts systematic analysis, builds innovative plans, and
understands what is meant by the risk/return tradeoff and how risk and return affect
investment decisions to create value for a firm.
Course Objectives
After completing students finish this course, students should be able to :
 Define risk and return

 Determine the relationship between risk and return.
 Comprehend the importance of capital budgeting decision explain mechanics;
evaluate the various capital budgeting techniques.
 Realize the risk and return relationship of financial and operating leverage.
 Be aware of the theoretical controversy about capital structure and the value of the firm.
 Explain various sources of long-term financing.
 Understand how to determine whether an investment should be made and how
to finance acceptable investments.
Chapter 1. Capital Structure Policy and Leverage
1.1. The capital structure question

1.2. Factors that influence capital structure decisions
1.3. Business and Financial Risk
1.3.1. Business risk and operating leverage
1.3.2. Financial risk and financial leverage
1.4. Determining the optimal capital structure
1.4.1. EBIT/EPS analysis
1.4.2. The effect of capital structure on stock price and the cost of capital
1.5. Introduction to the theory of capital structure
1.5.1. Modigliani and Miller (M&M) Propositions I and II with no taxes
1.5.2. Modigliani and Miller (M&M) Propositions I and II with taxes
1.5.3. Trade-off theory (Static Trade-off Hypothesis)
1.5.4. Signaling theory
1.5.5. Using debt financing to constrain managers
Chapter 2. A Review of Dividends and Dividends Policy
2.1 Dividend theories
2.2 Establishing the dividend policy in practice
2.3 Factors influencing dividend policy
2.4 Other factors related to cash dividends:
2.4.1 Stock dividends and stock splits
2.4.2 Stock repurchases
Chapter 3. Financial Forecasting
3.1 Overview of financial forecasting
3.2 Forecasting growth rates and outside financing
3.3 Forecasting external financing needs
3.4 Financial statement forecasting: the percentage of sales method
Chapter 4. Managing Current Asset
4.1 Working capital terminologies
4.2 Alternative current asset investment policies
4.3 Cash management
4.4 Managing inventory
4.5 Receivables management
Chapter 5. Financing Current Assets
5.1 Alternative current asset financing policies
5.2 Advantage and disadvantage of short-term financing
5.3 Sources of short-term financing (Accruals, Accounts Payable, Short-term Bank Loan, and
Commercial Papers)
Text Book
 Ross, S.A., Westerfield, R.W. and Jordan, B.D., Fundamentals of Corporate
finance,10th edition, McGraw-Hill/Irwin,USA,2013.
 Brigham, E. F., & Houston, J. F. (2001). Fundamentals of Financial Management.

9th Edition, Harcourt College Publisher,U.S.A.
Reference books
 Aswath Damodaran (2017) Corporate Finance theory and Practice ,Witley student
edition, 2nd edition, NewYork
 Van-Horne, J. (2002). Financial Management and Policy. 12th Edition, Upper

Saddle River, Prentice-Hall, New Jersey,U.S.A.
 Khan, M. Y. (2008). Financial Management: Text and Problems. 5th Edition,
McGraw-Hill Publishing Company Limited, New Delhi,India.
Assessment/Evaluation method
Test/Quiz 10%
Assignments 15%
Mid exam 25%
Final 50%

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Course Identification:

Course Title: Financial Management II

 Define risk and return

Chapter 1. Capital Structure Policy and Leverage

1.1. The capital structure question

 Brigham, E. F., & Houston, J. F. (2001). Fundamentals of Financial Management.

 Van-Horne, J. (2002). Financial Management and Policy. 12th Edition, Upper

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