COURSE PLAN

Academic Year: 2020-2021 (Year – II, Semester: I)

COURSE TITLE: Financial Management (MBA: 642)

INSTITUTION : Arsi University
College of Business & Economics
Department of Accounting & Finance
PROGRAM : Master of Business Administration (MBA); Extension
CREDIT HOURS: 2 Hrs.

COURSE RATIONALE:
With social, economic, and political changes in both the private and public sector, the
business environment is more challenging and exciting than ever before. Value
maximization is the leading theme behind all business objectives and decisions. A
business concern must carefully make decisions regarding its long-term investments, its
sources of capital to support those investments, and the proper appropriation of its profits
between distributions to shareholders and reinvestments. These are addressed in financial
management as investment, financing, and dividend decisions in which finance and
management professional is supposed to have an active role. It is designed to equip
students with the ways of addressing the above issues in light of the basic value
maximization principle.
COURSE DESCRIPTION:
This course is intended primary for post-graduate students in business management. The
theme of financial management is structured round the financial manager’s decisions
such as, investment decisions, financial decisions, dividend decisions and working capital
management. As it true of other functional areas of management, such as human resource
management and marketing management, financial management does not exist in
isolation but it’s an inseparable part of the general management. Therefore, the
orientation is with managerial emphasis on identification and solution of financial
problems confronting business enterprises. Therefore, this course covers basic issues of
financial management, capital budgeting, cost of capital, leverage, capital structure,

1|Page
dividend policy, management of cash and marketable securities, receivables management,
and inventory management. Each unit is related to the managerial decision-making
perspective.
COURSE OBJECTIVE:
The course provides a sound understanding of the financial principles, theories and
techniques, and aims to give a solid basis for decision making, incorporating the different
aspects of the company. The course in general concentrates in developing a high level
understanding of the tactical and strategic significance of the financial management
function within organizations.
OUTLINE
UNIT- 1: INTRODUCTION
1.1. Concept of Finance
1.2. Financial Management – An Overview
1.3. Functions of Finance Manager
1.4. Financial Decisions in a Business Firm
1.5. Agency Problem
UNIT- 2: CAPITAL BUDGETING
2.1. Capital Budgeting – An Overview
2.2. Techniques of Capital Budgeting
2.2.1. Non-discounting criteria or traditional techniques
2.2.2. Discounting criteria or time adjusted techniques
UNIT- 3: COST OF CAPITAL
3.1. Importance and Concepts
3.2. Measurement of Specific Costs – An Overview
3.3. Cost of Debt
3.4. Cost of Preference Share
3.5. Cost of Equity
3.6. Cost of Retained Earnings
3.7. Weighted Average Cost of Capital
UNIT-4: LEVERAGE
4.1. Concepts of Leverage
4.2. Operating Leverage
4.3. Financial Leverage
4.4. Combined Leverage
UNIT-5: CAPITAL STRUCTURE THORIES
5.1. Capital Structure Theories- An Overview
5.2. Net Income Approach
5.3. Net Operating Income Approach
5.4. Traditional Approach
5.5. Modigliani and Miller (MM) Approach
UNIT- 6: DIVIDEND POLICY AND FIRM VALUATION

2|Page
 OUTLINE
6.1. Dividend and Dividend policy: An Overview
6.2. Modigliani and Miller (MM) Hypothesis
6.3. Walter’s Model
6.4. Gordon’s Model
UNIT- 7: WORKING CAPITAL MANAGEMENT
7.1. Overview of Working Capital Management
7.2. Management of Cash and Marketable Securities
7.3. Receivable Management
7.4. Inventory Management
Group Assignment
Group Presentation
CONTINUOUS ASSESSMENT:
 Group Assignments including term paper & presentations….. 30%
 Mid Exam ….……………………………….……………….. 20%
 Final Examination ………………………………………….. 50%
Total ………………………………………… 100%
REFERENCES:
1. Brigham and Houston, Fundamentals of Financial Management, 3rd edition, the
Dryden Press, 1983.
2. Weston, J.F., and Brigham, E.F., Essentials of Managerial Finance, 7th edition,
Dryden Press, 1981.
3. GUP, B.E. Principles of Financial Management, John willey and Sons, 1983.
4. Kolb B.A., Principles of Financial Management, Business Publications Inc, 1983.
5. Brealey, R.and Myers, Principles of Corporate Finance, 2nd edition, Tata
McGraw-Hill international Book Company, 1984.
6. Pandey, I.M., Financial Management, 9th edition, Vikas Publishing House Pvt.
Ltd., 2007.
7. Block and Hurt, Fundamentals of Financial Management, 5th edition, Irwin, 1989.
8. Khan and Jain, Financial Management -Text, problems and Cases, Tata McGraw-
Hill, 2007.
9. Ross, Westerfield and Jordon, Fundamentals of Corporate Finance, 5th edition,
Irwin McGraw-Hill, 2000.
10. Any book on Financial Management which is relevant for the issues identified in
each unit.

3|Page