MBA (IB) 2020-22 Trimester II
Course: FINANCIAL MANAGEMENT-1
Course Credits: 3 (30 hours)
Course Coordinator: Dr. Niti Nandini Chatnani
Email: nitinandini@iift.edu; Ext: 315
Course Introduction
Financial Management (FM) is a core function of business management, and the FM course is built
around financial decision making by business firms. Business firms, governments and individuals,
regularly earn and raise funds, and spend and invest them. FM is a study of the decisions involved
in the effective and efficient management of these funds. The course includes a study of financial
markets and its participants, financial instruments traded in these markets, and the tools and
analysis used to make financial decisions.
The academic discipline of finance was developed in the United States during the 40s, 50s and 60s
with pioneering works by Nobel Laureates like Tobin, Markowitz, Modigliani, Miller, Sharpe and
others. Today, it has emerged as an interesting and exciting subject that covers a range of
decisions with financial implications.
The focus of the FM course is on how business firms find answers to three basic questions:
(1) How should scarce funds be allocated between competing investments?
(2) How should these investments be financed?
(3) How much of the profits generated on these investments should be distributed, and how
much reinvested into available investment opportunities?
Course Objectives
The core subject of Financial Management helps students to understand the approach and
objectives of financial decision making. This course provides the learner with a firm grounding in
the theory of finance, with tools to integrate the learning into the practice of evaluating the
investment, financing and dividend decisions made by businesses.
Programme Learning Goals covered through this Course
LG 2: Innovative and Creative Thinking with Critical Analysis
Students will be able to apply knowledge of international business management concepts to
analyze business problems critically and suggest innovative and creative solutions.
-Be able to apply appropriate theories, models and tools to critically analyze the problems/issues
in international business situations
- Be able to develop innovative and creative approaches towards solving of given problems/issues
in international business situations
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Pedagogy
This course will be completed over 30 hours (20 sessions of 90 minutes duration each). Pedagogy
would comprise online lectures, case studies, readings, numerical exercises, and discussions on
contemporary issues in finance. Students would be expected to read the relevant chapters before
each session to permit better understanding and participation in class. Since classes will be
conducted online, students will be expected to participate by answering the faculty’s call to respond
to a question, or to share an opinion, or any such inputs for increase of class engagement. Based
on this participation, students will be awarded marks for class participation.
Individual Assignment:
The world of finance is dynamic, and new practices, innovations and developments are both
interesting and intriguing. Your project will be an individual assignment that will offer you an
opportunity to investigate, in-depth, any one such practice, innovation or development that is of
particular interest to you. Some indicative topics on which you can do your assignment will be
shared with the class on email. You will be required to work on any one of those topics. You must
wait for the topic to be confirmed before you start your work.
The written report of your assignment (4-5 pages, Times New Roman, Font Size 12, 1.5 spaced)
will be due to be uploaded on Campus 360 at a date announced in class. The content and
presentation of your work and writing style will count towards your grade.
Prerequisites:
Financial Accounting (FA) Trimester 1 Core Course
Evaluation Components
1 Mid-Term Quiz * = 25 marks
Individual Assignment * = 25 marks
Class Participation** = 10 marks
End-Term Exam* = 40 marks
TOTAL = 100 marks
*Dates and Topics will be notified in advance.
** Class Participation will be accounted for entire duration of the course
Text Book / Reference Text
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Textbook:
Corporate Finance, 11e
(McGraw Hill Higher Education)
by Stephen Ross
Randolph W. Westerfield
Jeffrey Jaffe
Bradford D. Jordan
Ram Kumar Kakani
Supplementary Books:
1. Corporate Finance: Theory and Practice (Wiley Student Edition, Wiley 2nd ed)
Aswath Damodaran
2. Principles of Corporate Finance (MHHE (India) Pvt. Ltd., 11th ed)
Brealey, Myers, Allen & Mohanty
3. Corporate Finance & Investment (Prentice Hall India, 2nd ed)
Pike, Richard and Neale, Bill
4. Principles of Managerial Finance (Pearson Education, 9th ed)
Lawrence J. Gitman
5. Financial Management: Theory and Policy (Thomson South-Western, 10th ed)
Brigham, Eugene F. and Ehrhardt, Michael C.
6. Financial Management & Policy (Pearson Education, 12th ed)
J.C.Van Horne
Additional Resources and Readings:
IIFT subscribes to Bloomberg, which is a powerful financial resource that quickly and accurately
delivers business and financial information, news and insights from around the world. Students are
recommended to familiarize themselves with the resources. All students are strongly advised to
complete the BMC (Bloomberg Market Concepts) Certification.
Finance is a living subject that develops every day. Therefore, students are recommended to read
newspapers, journals and magazines that cover financial, economic and business issues. Some
useful readings could be - The Economic Times, The Business Standard and Business Line. Other
good readings include Business India, Business World, Business Today, Outlook Money, etc.
Business News Channels on TV such as CNBC TV18, NDTV Profit, and ET NOW also make for a
good source of learning.
Important Websites:
Some useful and informative websites are:
www.sebi.gov.in www.livemint.com
www.rbi.org.in www.icicidirect.com
www.nseindia.com www.moneycontrol.com
www.bseindia.com www.nsdl.com
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Detailed Session Plan:
Session Topics with Sub-Topics Reading Reference/Cases
1-2 Introduction to Financial Analysis of a Wealth Maximization
Management Case: Infosys
• Finance Function
• Goal of Firms
• Financial Decisions
• Agency Issues
3-4 Financial Environment of Firms Readings as issued in class
• Financial Markets
• Financial Securities
• Financial Intermediation
5-6 Tools of Finance Numerical Questions
• Time Value of Money
7-8 • Assessment of Risk and Return Reading Note on “Portfolio Theory”
• Systematic and Unsystematic
Risk
• Portfolio Theory
• Capital Asset Pricing Model
9-10 Valuation of Bonds Exercise on Bond Valuation
• Price and Yield
• Term Structure of Interest Rates
11-12 Valuation of Equities Exercise on Equity Valuation
• Balance Sheet Methods
• Discounted Cash Flow Methods
• Relative Valuation Methods
13-14 Cost of Capital Numerical Questions
• Cost of Debt
• Cost of Equity
• Cost of Preference Capital
• WACC
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15-16 Capital Budgeting Decisions Case Study
• Discounted and Non-Discounted
Methods
• Risk
• Inflation
• Estimation of Cash Flows
17 Risks in Capital Budgeting Case Study
• Sensitivity Analysis
• Scenario Analysis
• Monte Carlo Simulation
• Risk Adjusted Discount Rate
• Certainty Equivalent
18-19 Capital Structure Decisions Numerical Questions
• Leverages
• EBIT-EPS Analysis
• Capital Structure Theories
• Designing Capital Structure
• Trade-off Theory
20 Dividend Decision Readings as issued in class
• Dividend Policy
• Dividend Theories
• Returning Cash to Stockholders
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