Summary Notes

BA 7202 FINA NCIA L MANA GEM ENT




A Course Material on

FINANCIAL MANAGEMENT




By

Ms.M.MUTHUMANI

ASSISTANT PROFESSOR

DEPARTMENT OF MANAGEMENT SCIENCES

SASURIE COLLEGE OF ENGINEERING

VIJAYAMANGALAM – 638 056




1 DEPARTMENT OF MANAGEMENT SCIENCES

SCE

,BA 7202 FINA NCIA L MANA GEM ENT




QUALITY CERTIFICATE



This is to certify that the e-course material

Subject Code : BA7202

Subject : Financial management

Class : I Year MBA

Being prepared by me and it meets the knowledge requirement of the university curriculum.




Signature of the Author

Name : M.MUTHUMANI
Designation: Assistant Professor




This is to certify that the course material being prepared by Ms.M. MUTHUMANI is of
adequate quality. He has referred more than five books amount them minimum one is from
abroad author.




Signature of HD

Name:

SEAL




2 DEPARTMENT OF MANAGEMENT SCIENCES

SCE

,BA 7202 FINA NCIA L MANA GEM ENT




CONTENTS
CHAPTER TOPICS PAGE
NO

1 FOUNDATIONS OF FINANCE
1.1 Introduction
1.1.1 Meaning of Finance
1.1.2 Definition of Finance
1.1.3 Types of Finance
1.2 Overvie w
1.2.1 Scope of Financial Management
1.2.2 Objectives of Financial Management
1.2.3 Approaches to Financial Management
1.2.4 Importance of Financial Management
1.3 Time Value Of Money
1.3.1 Concept
1.3.2 Compound Interest
1.3.3 Present Value 7-21
1.4 Introduction To The Concept Of Return Of A Single Asset
1.4.1 Introduction
1.4.2 Concept and Types of Risk
1.4.3 Risk and Return of the Portfolio
1.4.4. Relationship Between The Risk And Return
1.5 Valuation Of Bonds And Shares
1.5.1 Valuation of Bonds
1.5.2 Valuation of Shares
1.6 Option Valuation
1.6.1 Factors Affecting Value Of Options
2 INVESTMENT DECISION
2.1 Capital Budgeting
2.1.1 Need Of Capital Budgeting
2.1.2 Principles
2.2 Need and importance/Nature

2.3 Identifying Relevant Cash Flows
22-32
2.4 Evaluation Techniques
2.4.1 Pay-back period method
2.4.2 Average Rate of Return method (ARR)
2.4.3 Net present value method(NPV)
2.4.4 Internal Rate of Return Method (IRR)



3 DEPARTMENT OF MANAGEMENT SCIENCES

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, BA 7202 FINA NCIA L MANA GEM ENT




2.4.5 Profitability index method or Benefit cost ratio (P.I)
2.5 Project Selection Unde r Capital Rationing
2.5.1 Capital Rationing
2.6 Inflation and capital budgeting

2.7 Concept And Measurement Of Cost Of Capital
2.7.1 Computation of cost of capital
2.7.2 Computation of specific source of finance
2.7.3 Measurement of cost of capital(specific cost and overall
cost)
3 FINANCING AND DIVIDEND DECISION
3.1 Leverages
3.1.1 Financial leverage
3.1.2 Uses of Financial Leverage
3.1.3 Operating leverage
3.2 Capital Structure
3.2 .1 Meaning of Capital Structure
3.2 .2 Objectives of Capital Structure
3.2.3 Factors Determining Capital structure
3.3 Cost Of Capital And Valuation
33-46
3.4 Designing Capital Structure

3.5 Dividend Policy
3.5 .1 Determinants of dividend policy
3.6 Aspects Of Dividend Policy

3.7 Practical Conside ration

3.8 Forms Of Dividend Policy

3.9 Share split

4 WORKING CAPITAL MANAGEMENT
4.1 Introduction
4.1.1 Concept of working capital
4.1.2 Need of working capital policy
4.1.3 Determinants of working capital requirement
4.1.4 Issues &Estimation of working capital requirement
4.2 RECEIVABLES MANAGEMENT
4.2.1Meaning
4.2 .2 Objectives
4.2 .3 Cost of Maintaining the Accounts Receivables


4 DEPARTMENT OF MANAGEMENT SCIENCES

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