The Finance function: Nature and Scope. Evolution of finance function – The new role in the contemporary scenario – Goals of finance function – maximizing vs satisfying (School); Profit Vs Wealth Vs Welfare; the agency relationship and costs – The new debate on maximizing Vs satisfying. Wealth maximization and Risk-Return trade off.
UNIT – II :
The Investment Decision: Investment decision process – Project generation, project evaluation, project selection and project implementation. Developing Cash Flow Data. Using Evaluation Techniques – Traditional and DCF methods. The NPV Vs IRR Debate. Approaches for reconciliation.
UNIT – III :
Capital budgeting and Risk: Capital budgeting decision under conditions of risk and uncertainty; Measurement of Risk – Risk adjusted Discount Rate, Certainty Equivalents and Beta Coefficients, Probability tree approach – Sensitivity analysis.
UNIT – IV :
The financing Decision: Sources of finance – a brief survey of financial instruments. Concept and financial effects of leverage. The capital structure decision in practice: EBIT-EPS analysis. Cost of capital: The concept – Average Vs Marginal cost of Capital. Measurement of cost of capital – Component Costs and Weighted Average Cost.
UNIT – V :
The Dividend Decision: Major forms of dividends – Cash and Bonus shares. The theoretical backdrop – Dividends and valuation; Major theories centered on the works of Gordon, Walter and Lintner – The basic dividend theorems for valuation. Dividend policies of Indian Companies.
UNIT – VI :
Current Assets Management: Concepts and characteristics of working capital. Factors determining the working capital. Estimating working capital requirements. Working capital policy. Management of current assets – Cash, Receivables and Inventory. Cash budget, Receivables policy, Credit terms – Financing current assets – Customers credit. Short term bank finance – Bank norms for working – Capital financing.
UNIT – VII:
Corporate Restructures: Corporate Mergers and acquisitions and take-overs-Types of Mergers – Economic rationale for Mergers, motives for mergers, Financial Evaluation of Mergers – different approaches for valuation.
UNIT – VIII :
Corporate Value based management systems – Approaches – Principles of good corporate Governance.
REFERENCES
Financial Management--Text and Problems, MY Khan and PK Jain, Tata McGraw- Hill, 2007