SPRING 2023

INSTITUTE of BUSINESS MANAGEMENT

College of Business Management
Department of Accounting & Finance

Financial Management - FIN 202

General Information

Title: Financial Management Faculty: …………………………………………

Code: FIN202 Email: …………………………………………..
Pre-requisites: Introduction to Business Office: ………………………………………….
Finance FIN201 Phone: (+92-21)111-002-004 / Ext: ……………
Consultation time: ……………………………...

Course Specifications
Program(s) on which the course is given BBA, BS (Econ & Fin), BS (Acc & Fin)
Major or minor elements of programs BBA, BS
Department offering the program College of Business Management
Department offering the course Accounts & Finance
Date of upgraded specification approval Required
Course Description

This course builds on the fundamental concepts learnt in the Introduction to Business Finance
(IBF) course. The main concepts covered in this course include Financial Planning &
Forecasting, Risk & Return, Capital Budgeting, Free Cash Flow valuation, Capital Structure
Decisions and Dividend Policies.

Course Objectives
Students will be able to understand the specific techniques and decision rules that are used to
help maximize the value of the firm. Another objective is to provide the student with the
tools to understand and solve the basic financial problems confronting business today.

Specific learning outcomes

 Able to estimate investment returns and risk
 Understand the approaches firms take in determining its capital structure
 Able to compute costs associated with different elements of capital structure
 Understand the dividend policy implications on the value of a firm and interpret payout
controversies
 Able to compute value of a firm
 Understand the Capital Budgeting process and able to apply different techniques of
Capital Budgeting

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 Course Teaching and Learning Activities
Assessment Brief Description Weight Aligned Course
Techniques Learning Outcomes
A1. Knowledge, application, understanding
Quizzes & reinforce class learning concepts. 10% CLO1, CLO2
A2. Knowledge ,understanding & reinforce
Assignments class learning concepts 10 % CLO1, CLO2
A3. Conceptual Knowledge and application
Midterm Exam understanding of students will be 30 % CLO1 & CLO2
checked in a controlled environment for
independent understanding of the core
concepts
A4. Class Intellectual and analytical skills
Discussions / (Through the semester) 05 % CLO1, CLO2, CLO3,
Participations CLO4
A5. Term report / Professional and practical skills 05% CLO1, CLO2,CLO3,
Presentation CLO4
A6. Final exam Professional skills &subject knowledge
(Students are expected to analyze and 40 % CLO2, CLO3, CLO4
apply concepts and principles learned in
class).
Total: 100 %

Formative Assessments:
 In class support behavior
 Punctuality and Attendance

Pedagogy
1. Pre class independent study
2. Lecture discussion
3. Problem solving
4. Assignment

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Course Content

Week Topic

1 Overview of the Financial Management

This topic will give the overview of the Financial Management in corporate
world. The course specifically looks into the investing and financing
decisions and how they impact the corporation.

 Significance of finance in the organizational structure of the

firm
 Responsibilities of the CFO, treasurer, and controller.
 Value maximization - the logical financial goal of the
corporation
 Value maximization & business ethics

2-3 Financial Planning & Forecasting

In initial session we discussed that the financial managers need to decide

between investment opportunities and plan how to raise finances for those
investments. The decision must add value to the whole organization and
increase shareholders wealth. Therefore, these decisions are taken after
thorough discussions and planning. That’s why financial planning is
required. The financial plan allows managers to think about the
implications of alternative financial strategies and how to ease out any
inconsistencies in the firm’s goal. We will first of all discuss the
components of a typical financial plan and then the use of financial models
and finally firm’s need for new financing.

 Forecasting sales and other items in the financial statements

 Pro-forma income statement and balance sheet
 Strategic, operating and financial plans

4-5 Risk and Return

This topic explores the risks and returns associated with a project. Financial
Managers need to know how to calculate risk and understand the
relationship between risk and cost of capital. Project’s cost of capital is the
rate of return that shareholders expect to earn from what they invest in
equally risky securities.

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 Business Risk and Financial Risk
 Business Risk and Its Components
 Sales Risk
 Operating Risk
 Financial Risk
 The Risks of Creditors and Owners
 Portfolio
 Volatility, Standard Deviation
 CAPM

6 Overview of Capital Structure Decision

The Capital Structure Decision

 MM Capital Structure Irrelevance Theory
 MM Home-made leverage Theory
 Pecking Order Theory
 The Optimal Capital Structure According to the Static Trade-Off Theory
 Costs of Financial Distress
 Costs of Asymmetric Information

7-8 Dividend Policy

 Review of dividend process

i. Dividend payment time line
ii. Measures of Dividend: dividend yield & dividend payout ratio
iii. Dividends & firm’s life cycle

 How do companies decide on payout ratio?

iv. Dividend information
v. Stock repurchase

 Payout controversy
vi. Dividend is irrelevant
vii. Clientele effect

 Other Factors effecting dividend policy

viii. Investment opportunities
ix. Expected volatility of future earnings
x. Financial flexibility
xi. Tax considerations
xii. Floatation costs
xiii. Legal requirements

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  Payout policies
xiv. Stable dividend
xv. Constant dividend payout ratio
xvi. Residual dividend

 Review of Dividend Models

9-11 Free Cash Flow (FCF) Valuation

 Computing FCFF and FCFE from Net Income

 Computing FCFF and FCFE from the Statement of Cash Flows
 Finding FCFF and FCFE from EBIT or EBITDA
 FCFF and FCFE on a Usage-of-free-Cash-Flow Basis
 Forecasting FCFF and FCFE
 Other Issues in Free Cash Flow Analysis
 Estimating of share value using FCF

12-14 Capital Budgeting Decisions

Investment decisions aka capital budgeting decisions are critical to any

firm’s success. These decisions may involve substantial cash flows and
have long term consequences. Company’s shareholders expect managers to
only invest in that project that adds value to the company and increases
shareholders’ wealth. Therefore, the managers must invest in projects
whose costs are less than their revenues. The difference between the
project’s cost and revenues is called net present value; which is one of the
techniques of project appraisal. NPV, with other techniques, helps the
management to evaluate projects and select the one that adds maximum
value to the firm. The techniques discussed are Payback, Discounted
Payback, ARR, NPV, IRR, MIRR and PI.
 The Capital Budgeting Process
 Basic Principles of Capital Budgeting
 Capital Budgeting Techniques
 Net Present Value
 Internal Rate of Return
 Payback Period
 Discounted Payback Period
 Average Accounting Rate of Return
 Profitability Index
 NPV Profile
 Ranking Conflicts between NPV and IRR
 The Multiple IRR Problem and the NO IRR Problem

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  Popularity and Usage of the Capital Budgeting Methods

15-16 Project Presentations

Students will work on a given topic of finance and a preselected company
in small groups (4-5 students). They will write a project report and also
present it.
17 Final Exam

Teaching and learning methods

Rubric for marking

Attribute Grade Grade Grade Grade Grade
A B C D F
Demonstrates Demonstrates Demonstrates Demonstrates Lack of
Conceptual a clear and clear limited/surfac a superficial understanding
Understanding deep understanding e understanding and effort to
understanding of the ideas understanding of the theory. understand
60% of the theory. presented in of the theory. the
the theory. theoretical
concepts
Structure Particularly Consistent Paragraph Weak Lack of focus
20% clear focus and flow and paragraph
ideas with good transitions are structure and
logical transitions adequate illogical
transitions transitions
throughout

Language Language Free of errors Minor errors Fundamental Serious errors

20% especially in mechanics. in mechanics. mechanics in
clear and Clear Sentences errors. Lack mechanics.
concise with and concise could be of clarity and Lack on
flawless language more effective concision clarity and
mechanics. concision.

Books / Materials:

Financial Management. Theory &Practice Authors: Eugene F. Brigham and Micheal C.

Ehrhardt 10th Edition

Supplementary Reading
 Fundamentals of Financial Management by Eugene F. Brigham and Joel E. Houston 10e
 Fundamentals of Financial Management by Ramesh K. S. Rao

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Head of Department Program Coordinator
Date: / / Date: / /

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