BME 2503 Financial Management


Course Code BME 2503
Course Title Financial Management
Number of Credits 05
Academic Year 02

The rational of this course is to provide an introductory level understanding of major concepts, principles, theories and techniques in Financial Management while mainly focusing on the investment and financing decisions of firms. The course is organized into three modules such as Financial Environment, Markets and Analysis, Risk, Return and Valuation of assets and Corporate Finance to clearly understand the basic tools and techniques of finance that are necessary for handling decision making process of an organization.

  • To understand concepts, principles and theories of financial management.
  • To describe and understand the financial environment, markets and to carry out financial analysis.
  • To understand the relationship between risk and return and to value assets.
  • To use the techniques and tools of financial management in decision making process of organizations especially with regard to investing and financing.

To conceptualize how the finance function is handled and managed in an organization in order to survive and grow competitively in the market.

After successful completion of this course students will be able to;

  • Have an overall understanding about the major concepts, principles, theories and techniques in Financial Management.

Have a basic understanding about the application of the theory in real business units.

Main Topics Sub topics No. of Hours
1.      An Introduction to Financial Management

 

1.1.   Meaning of Financial Management

1.2.   Major areas in Finance

1.3.   Goals of Financial Management

1.4.   Agency Relationship

04
2.      The Financial Environment

 

1.

2.

2.1.   Financial System

2.2.   Financial Market and types of markets

2.3.   Financial  Instruments and Institutions

2.4.   Capital Formation Process

2.5.   Stock Market

04
3.      Information for Financial Decisions

 

3.1.   Financial Statements and reports

3.2.   Market Value Added

3.3.   Economic Value Added

3.4.   Financial Ratio Analysis

05
4.      Time Value of Money

 

4.1.   Time Value Concept

4.2.   Time Value Adjustment for different types of cash flows

4.3.   Impact of Compounding Frequency

4.4.   Loan Amortization

12
5.      Risks and Return

 

5.1.   Concept of Risk and Return

5.2.   Estimation of Risk and Return of individual assets

5.3.   Estimation of Risk and Return in a portfolio context

5.4.   Capital Asset Pricing Model (CAPM)

06
6.      Bonds and their Valuation

 

6.1.   Types of Bonds

6.2.   Characteristics of  Bonds

6.3.   Bond Valuation

6.4.   Yields and Risks of Bonds

6.5.   Bond Ratings

06
7.      Stocks and their Valuation

 

7.1.   Rights and Privileges of Stockholders

7.2.   Types of Common Stocks

7.3.   Market for Common Stocks

7.4.   Valuation of Common Stock

05
8.      The Sources of Finance and Cost of Capital

 

8.1.   The importance of Cost of Capital

8.2.   Estimation of Component Cost of Capital

8.3.   Weighted Average Cost of Capital (WACC)

8.4.   Marginal Cost of Capital (MCC)

06
9.      Capital Budgeting Decisions

 

9.1.    Types of Investment Decisions

9.2.    Capital Budgeting Process

9.3.    Capital Budgeting Techniques

9.4.    Capital Rationing

9.5.    Sensitivity Analysis

08
10.  Capital Structure and Leverage 10.1.       Capital Structure Concepts

10.2.       Business and Financial risk of a firm

10.3.       Capital Structure Theories

08
11.  Dividend Policy

 

11.1.       Dividends and Business Growth

11.2.       Dividend Payment procedure

11.3.       Dividend Theories

11.4.       Factors Influencing Dividend policy

05
12.  Working Capital Management

 

12.1.       Basic Concepts of Working Capital

12.2.       Need for Working Capital

12.3.       Working Capital Policies

12.4.      Working Capital Financing Policies

06
Mode of Evaluation Final examination will be conducted
  • Brigham and Houston, Fundamentals of Financial Management, 9th Edition
  • I.M., Financial Management, 10th Edition

Stephen A. Ross, Fundamentals of Corporate Finance, 8th Edition