Course Name Financial Management
Course Code BMF 1203/BBA2102/BAF3102/DBA/DAF
Course Level Undergraduate-Degree
Year and Year One Semester Two/Year Two Semester Two/Year Three
Semester Semester One
Credit Units 4
Contact Hours 60
Course This module is concerned with the planning, raising and allocation
Description of scarce resources within the firm in order to attain the objectives
of the firm.
Course i) This module aims at enabling students to understand and
Objectives discuss the major decision areas and the important concepts
used in Financial Management.
Course Expected At the completion of the course, students should be able to show:
learning i. An awareneness and understanding of the financial
outcomes management theory and concepts
ii. The ability to use cognitive skills in analysis in decision
making and their limitations
iii. The ability to apply the key valuation concepts and
methodologies of Financial Management to attain the firms
set objectives
Detailed Course Content
Topic Contents Weeks
Introduction to the What is Financial Management
Module and Functions of Financial Management
Overview Financial Planning 1
Financial Controls
Financial Management Decisions
Management Accounting, Financial Accounting and
Financial Management.
Financial Objectives and the relationship with
Corporate Strategy
Non - Financial Objectives
Stakeholders
One: Measuring Measuring Financial Performance
the achievements Broad categories of ratios
of Corporate Ratio Pyramids
objectives Profitability Rations, i.e ROCE, Return of equity, Gross 2
Profit Margin
Debt and gearing ratios
Liquidity Ratios
Shareholders’ investment ratios
Managerial rewards schemes
Corporate governance
Not for profit organisations
Value for money
Performance measures
Two: The Distinction between capital Expenditure and revenue
Investment expenditure
Decision Non-current assets investment and working capital
investment 3
Investment by the commercial sector
Investment by not -for-profit organizations
Capital budgeting process
Relevant cashflows in investment process
Relevant costs and benefits of investments
The payback period
Return on Capital Employed
Three: Cost of Meaning of cost of capital
Capital Aspects of cost of capital
The cost of capital as an opportunity cost of finance 4
The cost of capital and risk
The relative costs of sources of finance
The dividend growth model
Cost of ordinary share capital
The dividend valuation model
Four: The working Nature of working Capital
Capital Working Capital characteristics of different businesses
Management Role of working capital management 5
The cash operating cycle
The liquidity ratio
The inventory turnover period
The account payable payment period
Sales revenue/net working capital ratio
Working capital needs of different types of business
Over capitalization and working capital
Over trading
Management of Managing inventories
working capital The EOQ
continues The minimum and buffer safety inventory level 6
Effects of discounts
JIT procurement
Managing accounts receivables
Effects on profit of extending credit
Credit control policy
Assessing credit worthiness
Managing accounts receivables
Collecting amounts owing
Early settlement discounts
Factoring
Trade credit
Five: The Internal sources of finance
dividends policy Retained earnings 7
Dividend payments
Factors influencing dividend policy
Theories of dividend policy
Scrip Dividend
Share repurchase
Six: Sources of Short term sources of finance
Finance Overdrafts, short term loans, trade credit, leasing, sale 8
and leaseback
Debt financing
Factors influencing choice of debt
Bonds, convertible bond
Security
Redemption bonds
Venture capital
Equity finance: ordinary shares
Rights issue
Bonus issue
Seven: Financial Definition of gearing 9
analysis and Finance risk
planning Gearing ratios
Gearing ratios based on market value
Operating gearing
Interest cover ratio
Effect of debt on shareholder’s wealth
Finance for small and medium sized entities
Eight: Investment Importance of discounting cashflows 10
Appraisal How to determine the discount factor
The net present value method
Using present value tables and annuity tables
The Internal Rate of Return method
Profitability Index method
Discounted payback period
Nine: Risk and Exchange rate risk 11
uncertainty Foreign currency risk
Causes of foreign exchange fluctuations
Foreign currency risk management
Interest rate parity
Purchasing power parity
Foreign currency derivatives
Interest rate risk
Causes of interest rate fluctuations
Interest rate risk management
Interest rate derivatives
Ten: Financial Meaning of financial distress 12
distress Causes of financial distress
Distress restructuring
Extension schemes
Composition schemes
Corporate restructuring
Reasons for corporate restructuring
Illustrations
Eleven: Cost of Meaning of cost of capital 13
Capital Aspects of cost of capital
The cost of capital as an opportunity cost of finance
The cost of capital and risk
The relative costs of sources of finance
The dividend growth model
Cost of ordinary share capital
The dividend valuation model
Twelve: Capital Capital structure theories 14
structure The traditional view
The net operating income (M&M) view of WACC
Market imperfection
Pecking order theory
Impact of cost of capital on investment
CAPM
Limitations of using CAPM
Thirteen: Business The nature and purpose of business valuations 15
valuations When are valuations required
Business valuation methods
Information requirements for valuation
Market capitalization
Asset valuation bases
The net assets method of share valuation
Choice of valuation bases
The P/E ratio method of valuation
The earnings yield valuation method
The cashflow based valuation models
Tutorials:
End of Course Evaluation and Review 30
Mode of Lectures, case studies and group presentations
Delivery/Teachin
g Methods
Mode of
Assessments 1. Take home coursework and test 30%
2. End of Semester Examinations 70%
Study Financial Management by I M Pandey
Materials/Readin Fundamentals of Corporate Finance by Ross Etal
g Lists Financial Decision-Making Texts Problems and Cases by RM
Srivastava