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204 - Financial Management: Ii Semester

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35 views6 pages

204 - Financial Management: Ii Semester

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awesomesid92
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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MBA

II SEMESTER

204 – FINANCIAL MANAGEMENT

SCHOOL OF DISTANCE EDUCATION


ANDHRA UNIVERSITY
VISAKHAPATNAM - 530 003
All copyrights and privileges reserved by the School of Distance
Education. No part of the publication may be reproduced in any
form without the prior permission of the copyright owner.
Information relating to various courses may be obtained from the
office of the School of Distance Education, Andhra university,
Visakhapatnam - 530 003.

DIRECTOR
SCHOOL OF DISTANCE EDUCATION
ANDHRA UNIVERSITY, VISAKHAPATNAM - 3

SCHOOL OF DISTANCE EDUCATION


ANDHRA UNIVERSITY
VISAKHAPATNAM
COURSE MATERIAL PREPARATION TEAM

h Prof. G. TULASI RAO


HOD UNIT - I
Dept. of Commerce & Mgt. Studies
A.U. Campus, Etcherla.

h R. SRINIVASARAO
Asst. Professor
UNIT - II
Dept. of Mgt. Studies
CRR College, Eluru.

h Prof. B. PARVATHISWARA RAO


Dept. of Commerce and Mgt. Studies UNIT - III
Andhra University, Visakhapatnam.

h R. RAGHU
Asst. Professor
UNIT - IV
Dept. of Commerce
CRR College, Eluru.

h Prof. P. VENI
Dept. of Commerce and Mgt. Studies UNIT - V
Andhra University, Visakhapatnam.

EDITOR

Prof. B. PARVATHISWARA RAO


Dean Faculty of Commerce and Management Studies
Andhra University,
Visakhapatnam
CONTENTS

Guideline. No Particulars Page.No.

Unit-I

01. Nature and Scope of Financial Management ......................................................1

02. Finance Function .......................................................................................................8

03. Objectives of Financial Management .................................................................. 21

04. Role of Financial Manager in Modern Environment ........................................ 31

05. Sources of Longterm Finance ............................................................................... 34

06. Understanding Financial Statements ................................................................... 45


07. Financial Statements Analysis .............................................................................. 52

08. Ratio Analysis .......................................................................................................... 57

09. Statement of Changes in Financial Position (Funds Flow Statement) ........... 96

10. Cash Flow Analysis ............................................................................................. 120

11. Break Even Analysis ............................................................................................ 127

12. Time Value of Money .......................................................................................... 139

13. Cost of Capital ...................................................................................................... 148

14. Weighted Average Cost of Capital ................................................................... 159

15. Capital Budgeting, Meaning, Significance and Process ................................ 166

16. Techniques of Capital Budgeting ...................................................................... 175


17. Modern Techniques of Capital Budgeting....................................................... 183

18. DCF Techniques and Their Comparison ......................................................... 202

19. Risk Analysis in Capital Budgeting .................................................................. 217

20. Finance Decision .................................................................................................. 232

21. Optimum Capital Structure-A Theoretical Perspective ................................ 250


Guideline. No Particulars Page.No.

22. Modigliani and Miller Approach ........................................................................ 261


23. Determinants of Optimum Capital Structure .................................................. 269
24. Dividend Decisions ................................................................................................ 278
25. Modigliani - Miller Dividend Irrelevance Model ............................................. 284
26. Determinants of Dividend Policy ....................................................................... 290
27. Corporate Dividend Behaviour ........................................................................... 297
28. Bonus Shares and Stock Splits Policies and Practices ..................................... 303
29. Rights Issue ............................................................................................................. 311
Unit-V
30. Working Capital Management ........................................................................... 319
31. Planning of Working Capital .............................................................................. 327
32. Management of Cash & Marketable Securities ................................................ 340
33. Inventory Management ........................................................................................ 355
34. Management of Receivables ................................................................................ 364
35. Financing of Working Capital ............................................................................. 375

v
SYLLABUS
FINANCIAL MANAGEMENT

Objective:
The objective of the course is to introduce the concepts, tools and techniques of financial
management and enable the students to understand the finance function.
Unit-I
Introduction to Financial Management : Meaning, Nature and Scope of Finance Function -
Objectives of Financial Management - Profit Maximisation Vs Wealth Maximisation - Role of
a Finance Manager - Methods and sources of Short-term and Long-term Finance.
Unit-II
Financial Statement Analysis : Understanding Basic Financial Statements - Ratio Analysis -
Funds Flow Analysis - Cash Flow Analysis - BEP.
Unit-III
Investment Decisions - Cost of Capital - Computation of WACC - Capital Budgeting Process
- Techniques of Capital Budgeting - Traditional and DCF Techniques of Investment Appraisal
- C/B under Risk and Uncertainty.
Unit-IV
Financing Decision - Financial leverage - Operating leverage - EBIT - EPS Analysis - Capital
Structure Planning - Theories of Capital Structure - Dividend policy - Models of Dividend
Policy - Practice - Bonus shares - Rights Issue.
Unit-V
Working Capital Management-Concepts and Approaches of Working Capital-Determinants of
Working Capital-Management of Current Assets-Cash-Receivables-Inventory.
Unit-VI
Case Studies
Suggested Readings :
1. Vyuptakesh Sharan, "Fundamentals of Financial Management", Pearson Education
(Singapore) Pte. Ltd., 2005.
2. M.Y.Khan and P.K. Jain, "Financial Management Text, Problems and Cases", Tata
McGraw Hill Publishing company Limited, New Delhi, 2004.
3. I.M. Pandey, "Financial Management", Vikas Publishing House Pvt. Ltd., 9th ed., 2005
4. Prasanna Chandra, "Financial Management Theory and Practice", Tata McGraw Hill
Publishing Company Limited, New Delhi, 6th ed., 2004.
5. James C. Van Horne, Financial Management and Policy
6. Prasanna Chandra, Financial Management : Theory and Practices
7. Solomon, Ezra, The Theory of Financial Management
8. I.M. Pandey, Financial Management
9. M.Y. Khan & Jain, Cases in Financial Management
10. Gittmen, Managerial Finance

vi

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