Financial Management

1. Corporate Finance
By: Dhaval Bhatt

2. Course Objective
• The primary aim of this course is to make students aware about the
various functions that a finance manager has to perform. The course is
based on understanding of structure decision making in three
interrelated disciplines in finance viz. Investment (Long Term);
financing decisions and policies related to dividend payments.

3. Course Topics
• Introduction of Financial Management
• Cost of Capital
• Estimation of Working Capital Requirement
• Dividend Policies
• Time Value of Money
• Capital Budgeting
– NPV, IRR, ARR, PBP, PI
– Estimation Cash Flow & Replacement Decisions

4. Pedagogy
Lecture format
Assignment
Quiz / Current Issues
Case Study

5. Textbook Author Publisher Edition
Essentials of Financial
Management
I M Pandey Vikas 10th Edition
Reference Books
Financial Management Khan & Jain McGraw Hill 6th Edition
Financial Management Prasanna Chandra McGraw Hill 7th Edition

6. Company
CEO
Operations
Working Capital
Profit
Financial
Institutions
Investing
Function
Working
Capital
Function
Dividend Function
Financing
Function
Equity
Debt
Interest
Capital

7. Company
CEO
Operations
Working Capital
Profit
Financial
Institutions
Investing
Function
Working
Capital
Function
Dividend Function
Financing
Function
Equity
Debt
Interest
A
B
C Capital

8. Sources of Finance
Long Term Financing
Equity Preference
Debenture &
Bonds
Bank Term
Loans
Short Term
Financing
Bank
Overdraft
Trade Credits

9. Share on Assets
and Income
Voting Rights
Pre-emptive
Rights
Limited Liability
Equity

10. Pros
•Permanent
Capital
•Borrowing Base
•Dividend
Payment is
Optional
Cons
•Costly
•Risk
•Earning Dilution
•Ownership
Dilution

11. Public Issue (IPO)
Underwriter
Private Placement
Rights Issue
Ways of raising Equity Funds

12. Other Long Term Financing
Debentures
• Fixed Interest Rate
• Maturity
• Credit Rating
• Tax Deduction on Interest
(Hybrid Security)
Preference Share
• Prior Claim on Assets
• Fixed Dividend
• Redemption
• Sinking Fund
Term Loans
• Fixed Maturity
• Security
• Direct Negotiation
• Restrictive Covenants

13. Company Deposits
Public Fixed Deposits
• Investment in a Company like FDs
Lease Financing
• Operating Lease
• Financial Lease
• Sale and Lease back
Hire Purchase Finance
• Purchase of an assets on Installments
• Ownership gets transferred only when all installments are paid

14. Action
Sources
Users
Content
Orientation
Frequency
Financial Accounting
• Recording
• Generally Accepted
Accounting Principles
• Large Group
• Monetary
• Historical
• Quarterly and Annual
Financial Management
• Planning
• Whatever useful to
Management
• Small Group
• Monetary & Non – Monetary
• Historical & Estimates
• Varies with purpose

15. Introduction to Financial Management
Scope of Financial Management
Real Assets vs Financial Assets
 Tangible & Intangible Assets (Real Assets)
 Equity & Borrowed Funds (Financial Assets)
 Functions of Finance Manager
 Long Term Decision Making
• Investing Decisions
• Financing Decisions
• Dividend Decisions
 Short Term Decision Making
• Liquidity Decisions

16.  Financial Goals
 Profit Maximization
 Wealth Maximization
Agency Problem
 Ownership vs Management
 Agency Cost