1

pCOURSE PLAN

Academic Year: 2012/13 Semester: I

COURSE TITLE: Financial Management (MBA-521)

INSTITUTION: Mekelle University

College of Business and Economics

Department of Business Management

CREDIT HOURS: 2 Hrs

INSTRUCTOR(S): Mr. Assefa Worede

Dr. Suresh Vadde

COURSE DESCRIPTION AND OBJECTIVE

The course provides an introduction to corporate financial management. The course aims at

familiarizing students with the basics of financial management. It is designed to introduce

students to the concepts and techniques necessary to analyze and implement optimal investment

and financing decisions by firms.

The course focuses on the role of the finance function in the firm and how financial decisions by

management create value. It studies the nature of capital markets and related institutions and

selected techniques of financial analysis, including capital budgeting, discounted cash flow

valuation and risk analysis.

GOALS OF THE COURSE

To show finance’s role and function in the firm and how astute financial management can create

wealth. Specifically, to look at how the firm’s interaction with capital markets can maintain or

increase shareholder wealth through capital budgeting, capital structure and payout policy.

TEACHING METHODOLOGY

The course delivery methodology is designed to be student-centered in order to empower the

students and make them participate and active in the teaching-learning process. Besides, the

course assessment is continuous assessment and having one final examination. The details are as

follows:

Lecture session

Group/Individual assignments

Group/Individual presentations

Quizzes

Final examination

2

S.NO. CHAPTER NAME BUDGETED

TIME

CHAPTER-I INTRODUCTION TO FINANCIAL

MANAGEMENT

4 Hrs. Objective

After studying this chapter, you should be able to understand the definition

of financial management, basic principles, functions, financial decision

making, objectives/goals, factors influencing financial decisions, financial

management and other areas of study and also financial environment.

1.1 Introduction

1.2 Basic Principles of Financial Management

1.3 Functions of Financial Management/Manager

1.4 Financial Decision Making

1.5 Objectives/Goals of Financial Management

1.6 Factors Influencing Financial Decisions

1.6 Financial Management and Other areas of Study

1.7 Financial Environment

CHAPTER -II FINANCIAL STATEMENTS ANALYSIS (RATIO ANALYSIS)

Objective

After studying this chapter, you should be able to learn about introduction of

ratio analysis, advantages, Significance of Ratio Analysis to Users of

Financial data and different types ratios.

6 Hrs. 2.1 Introduction

2.2 Advantages of Ratio Analysis

2.3 Significance of Ratio Analysis to Users of Financial data

2.4 Types of Ratios

Liquidity Ratios

Leverage Ratios

Coverage Ratios

Activity Ratios

Profitability Ratios

CHAPTER -III FINANCIAL DECISION

Objective

After studying this chapter, student is in a position to understand the concept

of leverage, operating and financial leverages, EBIT and EPS analysis,

concept of capital structure and its approaches.

6 Hrs.

3.1

Leverages

Concept of leverage

Operating and Financial leverage

EBIT and EPS Analysis

3

3.2 Form of Capital structure

Concept of Capital Structure

Capital Structure Determinants

Net Income Approach

Net Operating Income Approach

Modigliani and Miller Approach

CHAPTER -IV INVESTMENT DECISION

6 Hrs.

Objective

After studying this chapter, you should be able to understand the

introduction of capital budgeting, capital budgeting process, kinds of capital

budgeting decisions and different methods of capital budgeting.

4.1 Introduction to Capital Budgeting

4.2 Capital Budgeting Process

4.3 Kinds of Capital Budgeting Decisions

4.4 Methods of Capital budgeting

4.4.1 Traditional Methods

Pay-back Period Method (PB)

Average Rate of Return (ARR)

4.4.2 Time Adjusted or Discounted Cash Flow

Net Present Value Method (NPV)

Internal Rate of Return Method (IRR)

Profitability Index Method (PI)

CHAPTER -V WORKING CAPITAL DECISION

4 Hrs.

Objective

After studying this chapter, you should be able to learn the concepts of

working capital, types and components working capital, factors determining

the working capital requirements and forecasting the working capital

requirements.

5.1 Concepts of Working capital

5.2 Types of Working Capital

5.3 Components of Working Capital

5.4 Factors Determining the Working Capital Requirements

5.5 Forecasting Working Capital Requirements

CHAPTER -VI DIVIDEND DECISION

6 Hrs.

Objective

After studying this chapter, you should be able to know dividend and

valuation of the firm, relevance and irrelevance dividend policies.

6.1 Introduction

6.2 Dividend and Valuation of the Firm

6.3 Relevance of Dividend Policy

Walter’s Model

Gordon’s Model

6.4 Irrelevance of Dividend Policy

Residual Theory

Modigliani- Miller Approach

4

ASSESSMENT

Group/Individual Assignment ……………………………… 10%

Group/Individual Presentations …………………………….. 10%

Quizzes ……………………………….…………………….. 30%

Final Examination ………………………………………….. 50%

Total ………………………………………… 100%

SCALE

A [85–100] C [50 – 60]

B+ [75 – 84] D+ [40 – 49]

B [65 – 74] D [30 – 39]

C+ [61 – 64] F [0 – 30]

COURSE POLICY

According to the MU legislation, you must attend at least 80% of the 32 hours (i.e., at

least 26 hours) and score at least 50% result from the continuous assessment; otherwise

you can’t sit for the final examination.

You must submit group assignments at least within a given dead line.

You must attend group assignments and group presentations regularly.

SUGGESTED READINGS:

Brigham, E.F., and Ehrhardt, M.C., 2003, “Financial Management: Theory and Practice”,

South Western Publishing, USA, 12th

Ed.

I.M. Pandy, 2005, “Financial Management”, Vikas Publishing House Pvt. Ltd., New

Delhi, 9th

Ed.

Myers, S.C., and Brealey, R.A., 2003, “Principles of Corporate Finance”, McGraw-

Hill/Irwin, USA, 7th

Ed.

M Y Khan and P K Jain, 2004, “Financial Management Text, Problems and Cases”, Tata

McGraw Hill.

Prasanna Chandra, 2001, “Financial Management – Theory and Practice”, Tata McGraw

Hill, 2nd

ed.

Preethi Singh, 2009, “Fundamentals of Financial Management”, Ane Books Pvt. Ltd.,

New Delhi, 2nd

Ed.

Any Book, journal, or article on Financial Management or Corporate Finance.