E2.
2 SOB2010: Financial Management
E2.2.1 Pre-Requisite: None
E2.2.2 Rationale
Responsible financial management practices need to be implemented in order to be
financially responsible and therefore excellent stewards of all finances and resources
pay particular attention to this financial aspect of the business to optimally utilize
business finances.
E2.2.3 Aim
The aim of the course is to provide students with an understanding of the principles
of financial management, and enhance understanding of how businesses operate
and how finance functions support businesses in achieving their goals.
E2.2.4 Objectives
By the end of the course, students should be able to:
Apply working capital management techniques;
Calculate the cost of capital and factors which affect it and carry out effective
investment appraisal;
Discuss the principles of business and asset valuation;
Evaluate alternative sources of business finance;
Apply risk management techniques in business.
E2.2.5 Content
1. Introduction to Financial Management
The nature and purpose of financial management
Financial objectives and relationship with corporate strategy
Stakeholders and impact on corporate objectives
Financial and other objectives in not for profit organisations
2. Financial Management Environment
The economic environment for business
The nature and role of financial markets and institutions
The treasury function
3. Time Value of Money
The interest rate
Simple interest
Compound interest
Compounding more than once a year
Amortizing a loan
4. Working capital management
The nature, elements and importance of working capital
Management of inventories, accounts receivable, accounts payable and cash
Determining working capital needs and funding strategies
5. Cost of Capital
Risk, return and cost of capital
Estimating the cost of equity, cost of debt and other capital instruments
Estimating the overall cost of capital and impact of cost of capital on
investments
Capital structure theories and practical considerations.
6. Investment Appraisal
Investment appraisal techniques
Allowing for inflation and taxation in investment appraisal
Adjusting for risk and uncertainty in investment appraisal
Specific investment decisions (lease or buy, asset replacement, capital
rationing)
7. Business Finance
Sources of and raising short term finance
Sources of and raising long term finance
Internal sources of finance and dividend policy
Gearing and capital structure considerations
Finance for Small and Medium size entities
8. Business Valuations
Nature and purpose of the valuation of business and financial assets
Models for the valuation of shares
The valuation of debt and other financial assets
The efficient market hypothesis (EMH) and practical considerations in the
valuation of Shares
9. Financial analysis
Financial analysis techniques and ratios
Benefits and limitations of techniques
E2.2.6 Method of Delivery
Full-time, distance, evening, weekends and e-learning
E2.2.7 Assessment
Component of assessment Number Contribution to overall
grading (%)
1. Continuous assessment
Assignments 2 10
Laboratory sessions
Fieldwork sessions
Tests 2 30
Other components (specify)
Subtotal of continuous 40
assessment
2. Final examination 1 60
E2.2.8 Prescribed books
Hillier D. Et al., (2011) Fundamentals of corporate finance, McGraw Hill
Brealey, R, A, Myers, S, C and Marcus, A, J. (2008) Fundamentals of Corporate
Finance, 6th edition, McGraw Hill
E2.2.9 Recommended books
Arnold, G, (2008) Corporate Financial Management, 4th edition, FT Prentice Hall
Watson, D and Head, A, (2009) Corporate Finance: Principles and Practice, 5th
edition, FT Prentice Hall