Admas University
Faculty of Business
Department of Accounting and Finance
Course Outline
Course title: Financial Management I
Course code: AcFn 2051; Credit hour:3; Prerequisite: AcFn 1012
Academic Year: Instructor Name; Course Coordinator:
Course Description
The course deals with the nature and scope of financial management, financial analysis, valuation
concepts, cost of capital and long-term investment decision.
Course Objectives
At the end of this course students will be able to:
understand the basic theoretical concepts of finance functions in modern business enterprise;
evaluate alternative sources of finance and investment decision;
identify the advantage and disadvantage of debt financing;
measure and evaluate financial performance of an organization;
perform valuation of financial assets.
Course Contents
Chapter Topic Time allotted
1 OVERVIEW OF FINANCIAL MANAGEMENT 4hrs
1.1. Major Areas of Finance: Financial Services Vs Financial
Management
1.2. Finance and Related Disciplines
Finance and Accounting
Finance and Economics
Finance and Other Related Disciplines (Marketing, Production,
Quantitative Methods)
1.3. Scope of Financial Management
Traditional Vs Modern Views
Functions of Financial Management
Key Activities of the Financial Manager
1.4. Objectives of Financial Management
Profit/EPS Decision Criterion
Wealth Maximization Decision Criterion (MVA and EVA)
1.5. Overview of Selected Finance Theories
Agency Problem (Theory)
1
The Concept of Perfect Capital Markets
Security Market Efficiency
Risk and Return: Trade offs
2 FINANCILA ANALYSIS & PLANNING 10 hrs
2.1.Financial Analysis
Why Financial Analysis?
Financial Statements and Process of Financial Analysis
Considerations in Financial Analysis
Types and Tools of Financial Analysis
Types of financial ratios and interpretations
2.2.Financial Planning
Meaning of Financial Forecasting
Strategic Considerations in Financial Forecasting
Steps in Financial Forecasting
Techniques of Financial Forecasting
Recent Developments in Financial Forecasting
3 VALUATIONS OF FINANCIAL INSTRUMENTS & COST OF 8 hrs
CAPITAL
3.1.Valuation of Bonds and Stocks (Securities)
General Features of Debt & Equity Securities
Direct and Indirect Claims
Valuation: Meaning and Importance
The General Valuation Model
Valuation of Corporate Bonds
Valuation of Common and Preferred Stocks
3.2.Cost of Capital
Cost of Capital: Meaning, Theories, and Basic Assumptions
Alternative Models (DVM and CAPM)
Specific Costs of Debts, Preferred Stocks, Common Stocks, and
Retained Earnings
Weighted Average Cost of Capital
Marginal Cost of Capital
4 BASICS OF RISK AND RETURN 4hrs
4.1. Definition of Return and Risk
4.2. Measuring Return
4.3. Measuring Risk
4.4. Portfolio Risk and Return
4.5. Risk – systematic and unsystematic risk
4.6. Risk and Return – Diversification
5 12hrs
LONG TERM INVESTMENT DECISIONS (CAPITAL
BUDETING DECISIONS)
5.1. Introduction
Meaning and Importance of Capital Budgeting
2
Difficulties in Capital Budgeting
Types of Long-Term Investments
5.2. Underlying Assumptions in Capital Budgeting
5.3. Parts of Investment and the Concept of Cash Flows
Parts of Investment Cash Flows
Principles of Cash Flow Projection
Determining Project Cash Flows
5.4. Appraisal of Long-Term Investments
Financial Appraisal Criteria
Independent Vs Mutually Exclusive Projects
Comparison of the Various Appraisal Criteria
Financial Appraisal Under Conditions of Capital Rationing
Appraisal of Projects with Unequal Lives
5.5. Project Evaluation under Condition of Uncertainty (Risk)
Certainty Equivalent Factor (CEF)
Risk Adjusted Discount Rates (RADR)
Capital Budgeting under Inflationary Situation (Real Vs Nominal
Rates)
6 CAPITAL STRUCTURE AND THE CONCEPT OF LEVERAGE 10hrs
6.1 Brief Concept of Capital Structure:
EBIT –EPS Analysis
Capital structure theories with symmetric information, including
The Modigliani-Miller (MM) irrelevance propositions
Capital structure with tax and financial distress costs
Key Business Considerations
6.2 The Concept of Leverage:
Leverage and its meaning
Types of Leverage:-
Operating Leverage,
Financial Leverage, and
Combined Leverage
Effects of Leverage
Teaching & Learning Methods
Lectures
Group Discussion
Question & Answers
Presentations
Problem based learning
Assessment Methods
Grand
FAT SAT
Formative Assessment Total
50% 50%
100%
3
Practical Individual or
class participation 10
presentation of the
group work 10 %
FA 1
Individual
group work 10 %
Quiz (at least
FA 2
FA 3
FA 4
%
two) 20 %
FA1 A FA1 B
Key:
FA: Formative Assessment
FAT: Formative Assessment Total
SAT: Summative Assessment Total
Text Book
Bringham and Ehrhardt (2011) Financial Management: Theory and Practice 13th ed.
South-Western, Ohio
Reference:
Bringham, E. F. and Houston, J. F. (2001) Fundamentals of Financial Management
9th ed. South-Western, Ohio
Bringhamand Ehrharat (2008) Financial Management-Theory and Practice; 12th ed.
South-Western, Ohio
Brigham. E.F. (2006) Fundamentals of Financial Management, 9th ed The Dryden press,
South-Western, Ohio
Brigham and Houston. (2001)Fundamentals of Financial Management, 7th Ed, South-
Western 2001 South-Western, Ohio
Brealey Myers(2000) Principles of Corporate Finance. 7th ed, McGraw-Hill New York
Brealey, Myers and Allen.( 2011) Principles of Corporate Finance. 10th ed McGraw-Hill
New York
Chandra, P. (2004) Fundamentals of Financial Management 3rd ed. Tata McGraw Hill,
New Delhi.
C. Paramasivan and T. Subramanian. Financial Management New Age International New
Delhi
Ehrhardt and Bringham (2011) Corporate Finance: A Focused Approach 4th ed South-
Western, Ohio
Gitman, L.J. (1997), Principles of Managerial Finance,8th ed. Prentice Hall New York
Gitman, L.J. (2002), Principles of Managerial Finance, 10th ed Prentice Hall New York
Khan and Jain (2000)Basic Financial Management Tata McGraw Hill New Delhi
Pandey, I. M., Financial Management, 4th edition, Prentice-Hall of India, New Delhi.
Ross, Westerfield and Jaffe. (2013). Corporate Finance.10th ed McGraw-Hill New York
Ross, Westerfield and Jaffe. (2013). Fundamentals of Corporate Finance: Standard Edition.
10th ed McGraw-Hill New York
Ross, S.A, et.al (1997), Fundamentals of Corporate Finance, 4th ed
4
Van Horne, James C. and Wachowicz, John M. (2008), Fundamentals of Financial
management, 13th ed, McGraw-Hill , Boston
Van Horne, James C. and Wachowicz, John M. (1998), Fundamentals of Financial
management, 10th ed, McGraw-Hill , Boston
Watson and Head (2007).Corporate Finance Principles & Practice. 4th Prentice Hall New
York
