Bazg524 Sep30 FN

BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE, PILANI
WORK INTEGRATED LEARNING PROGRAMMES

Digital
Part A: Content Design
Course Title Financial Management

Course No(s) BA ZG521/ FIN ZG521 / MBA ZG521
Credit Units 4
Credit Model
Content Authors MAHALAKSHMI MUDLIAR
Course Objectives
No
CO1 Gain basic understanding of the underlying concepts and building blocks related to
financial management. Develop understanding of the tools relevant to financial
management including time value of money and financial statements analysis.
CO2 Understand business risk, financial risk, break even analysis, and impact of leverage on
risk. Understand the relationship between risk and return and the drivers of risk.
CO3 Understand the application of cost of capital and do the necessary calculations of the
components of cost of capital and WACC; Basic principles of capital budgeting,
categories of capital budgeting projects, discounted and non-discounted cash flow
evaluation methods and their limitations, analysis of risks involved in capital budgeting
projects.
CO4 Definition of working capital; Composition and determination of working capital;

Financing and management of current assets; Cash management.
CO5 Understanding the major theories of capital structure and their implications; How to set
target capital structure; Dividend policy and its impact on firm value.
Text Book(s)
T1 Fundamentals of Financial Management, 6th Edition (2014), by Prasanna Chandra,
published by McGraw Hill Education (India) Private Limited
Reference Book(s) & other resources

R1 Financial Management Theory and Practice, 8th Edition (2012), by Prasanna
Chandra, published by McGraw Hill Education (India) Private Limited
R2 Fundamentals of Financial Management, 12th Edition (2012), by Brigham and
Houston, published by Cengage India
R3 Financial Management and Policy, 13th Edition (2009), by Van Horne J.C., published
by PHI Learning
R4 In addition (for some sessions) we will be referring to selected articles from top journals
relevant to the topics at hand; links and/ or references to the same will be provided later
by the instructor
Content Structure
1. Foundations of Financial Management
1.1. Introduction
1.1.1. Overview of Financial Management
1.1.2. Interface between Finance and other Functions
1.1.3. Shareholder wealth maximization
1.1.4. Basic principles of financial management
1.1.5. Overview of Indian Financial System
1.2. Key Financial Statements

1.2.1. Key components of financial statements
1.2.2. Understanding the Balance Sheet
1.2.3. Understanding the Income Statement
1.2.4. Understanding the Cashflow Statement
1.3. Financial Statements Analysis (FSA)

1.3.1. Principles of FSA
1.3.2. Tools and Techniques used in FSA
1.3.3. Limitations of FSA
1.4. Ratio Analysis

1.4.1. Introduction to Ratio Analysis
1.4.2. Calculation of all key ratios including Activity, Liquidity, Solvency, Profitability and
Valuation ratios and their interpretation
1.4.3. Application of Dupont Analysis and its interpretation
1.5. Time Value of Money (TVM)

1.5.1. Basic principles of Time Value of Money.
1.5.2. Calculation of FV, PV of a single sum of money as well as for an annuity. Differentiate
between an Ordinary Annuity and an Annuity Due and relevant calculations. Concept
of perpetuity.
1.5.3. Calculate the annual percentage yield or effective annual rate of interest and explain
how it differs from nominal interest rate.
1.5.4. Relevant applications of TVM.
2. Risk Management
2.1. Introduction
2.1.1. Understand the relationship between Risk and Return
2.1.2. Impact of inflation on returns
2.2. Term Structure of Interest Rates

2.2.1. Theories of the Term Structure of Interest Rates
2.2.2. Implications of the Term Structure of Interest Rates
2.3. Classification of Risk

2.3.1. Business Risk Vs. Financial Risk
2.3.2. Market Risk, Credit Risk, Operational Risk
2.4. Leverage and Break Even Analysis

2.4.1. Operating Leverage, Financial leverage and Total Leverage
2.4.2. Break Even Analysis
2.4.3. Applications of Break Even Analysis
3. Cost of Capital and Capital Budgetting

3.1. Cost of Capital
3.1.1. Understanding the relevance and application of cost of capital to business decisions
3.1.2. Determine the cost of various components of Capital, including debt, and equity
3.1.3. Calculate the Weighted Average Cost of Capital (WACC)
3.1.4. Impact of floatation cost on cost of capital
3.2. Capital Budgeting

3.2.1. Different type of Capital expenditure decisions (Capital Budgeting) and its importance
to business sustainability
3.2.2. Non Discounted Cash flow methods of evaluation
3.2.3. Discounted Cash flow methods of evaluation
3.2.4. Limitation of the various methods of evaluation
3.3. Other Considerations

3.3.1. Risk Analysis in Capital Budgeting
3.3.2. Scenario Analysis, Sensitivity Analysis, etc.
4. Working Capital and Liquidity Management
4.1. Basic Concepts

4.1.1. Objective of working capital management
4.1.2. Static and dynamic view of working capital
4.1.3. Factors affecting the composition of working capital
4.1.4. Determination of working capital - operating cycle and simulation approaches
4.1.5. Evaluation of working capital management
4.2. Current Assets/ Cash management

4.2.1. Financing of Current Assets
4.2.2. Management of Current Assets
4.2.3. Management of Cash
5. Dividend Policy and Capital Structure
5.1. Introduction
5.1.1. Introduction to Theories of Capital Structure - Miller Modigliani
5.1.2. Asymmetric Information Theories
5.1.3. Pecking Order Theory
5.1.4. Understanding financial distress and agency costs
5.2. Capital Structure Decisions

5.2.1. Determinants of Capital Structure
5.2.2. Setting a target Capital Structure
5.3. Dividend Decisions

5.3.1. Dividend vs. Capital Gains: What do investors prefer?
5.3.2. Why do companies pursue a stable dividend policy?
5.3.3. Alternatives to dividend payments - bonus shares, stock options, share buyback, etc.
Learning Outcomes:
No Learning Outcomes
LO1 Able to analyze and interpret the three key Financial Statements so as to assess the
health of a firm/ business.
LO2 Apply Time Value of Money concepts for valuation.
LO3 Distinguish between the different types of risk faced by a firm and express the
relationship between risk and return.
LO4 Able to calculate all the components of cost of capital as well as the overall WACC
for a firm.
LO5 Able to evaluate Capital Budgeting projects and make Accept/ Reject decisions
based on NPV/ other business rules.
LO6 Able to formulate corporate Financial Policies in the areas of Working Capital/
Cash Management, Capital Structure, and Dividend Policy so as to maximize firm
value.
LO7 Demonstrate solutions to "real" business/ financial problems by employing excel/

financial modeling in a optimal/ effective manner.
LO8 Analyze/ Evaluate real life business/ financial situations and identify/ apply the
appropriate framework/ concepts to solve it in a optimal/ effective manner.
Experiential Learning Components:
1. This course will feature experiential learning components in the form of projects and assignments
(such as financial modeling, simulation, etc.) that are designed to enable the participants to learn by
doing. This will also form part of the Evaluation Components for the course.
2. Please note that experiential learning components are integrated into the following modules:
Module Topic Experiential Learning Component

1.3 Financial Statements Analysis Financial Modeling (MS Excel)
1.4 Ratio Analysis Financial Modeling (MS Excel)
1.5 Time Value of Money Financial Modeling (MS Excel)
2.4 Leverage and Breakeven analysis Financial Modeling (MS Excel)
3.1 Cost of Capital Financial Modeling (MS Excel)
3.2 Capital Budgeting Financial Modeling (MS Excel)
3.3 Risk Analysis, Scenario/ Sensitivity Financial Modeling (MS Excel)
Working Capital and Liquidity
4 Simulation game
Management
3. We will be building financial models and doing simulation using Microsoft Excel, hence students will
need a laptop/ PC preloaded with Microsoft Excel 2010 (or later) for facilitating experiential learning.
4. For doing financial calculations it is recommended that students purchase/ obtain a financial calculator.
We recommend the Texas Instruments BA II plus calculator because it is very intuitive/ easy to operate
and also because it is economical to purchase. This calculator comes in two versions, basic and
professional. The basic version is sufficient for our course work and indeed even for professional exams
such as CFA/ FRM. If you do not wish to purchase a financial calculator then you may fall back on any
basic/ standard calculator. Whichever calculator you decide to go with make sure you become familiar
with its operation and also practice using the calculator throughout the course and not just before exam.
Part B: Learning Plan
Academic Term First Semester 2018-2019

Course Title Financial Management
Course No BA ZG521/ FIN ZG521 / MBA ZG521
Lead Instructor MAHALAKSHMI MUDLIAR
Contact Hour 1
Type Content Topic Title Study/HW Resource
Ref. Reference
Pre CH 1.1 Review Course Handout/ Chapter 1 and 2 of text (T1)

List your expectations from Replay appropriate
this course prerecorded content/
courseware (module wise)
During 1.1 Introductions Chapter 1 and 2 of text (T1)

CH Overview of Financial
Management
Interface between Finance
and other Functions
Post 1.1 Review reference chapters Chapter 1 and 2 of text (T1)

CH from textbook; replay
videos as needed to clarify
understanding; do the
assigned homework
Contact Hour 2
Ref. Reference
Pre CH 1.1 Review Course Handout/ Chapter 1 and 2 of text (T1)

List your expectations from Replay appropriate
this course prerecorded content/
During 1.1 Shareholder wealth Chapter 1 and 2 of text (T1)

CH maximization
Basic Principles of
Financial Management,
Understanding Indian
Financial System
Post CH 1.1 Review reference chapters Chapter 1 and 2 of text (T1)

from textbook; replay
assigned homework
Contact Hour 3
Ref. Reference
Pre CH 1.2 Review previous week's Chapter 3, 4, 5, and 6 of text

topics. (T1)
Replay appropriate
prerecorded content/
During 1.2 Introduction to FS; Key Chapter 3, 4, 5, and 6 of text

CH components of financial (T1)
statements;
Understanding the Balance
Sheet
Understanding the Income
Statement
Understanding the Cash
Flow Statement
Post 1.2 Review reference chapters Chapter 3, 4, 5, and 6 of text

CH from textbook; replay (T1)
assigned homework
Contact Hour 4

Ref. Reference

topics. (T1)
Replay appropriate
prerecorded content/
During 1.3 Principles of Financial Chapter 3, 4, 5, and 6 of text

CH Statements Analysis; (T1)
Tools and Techniques used
in financial statements
analysis
Limitations of financial
statements analysis
Post 1.3 Review reference chapters Chapter 3, 4, 5, and 6 of text

CH from textbook; replay (T1)
assigned homework
Contact Hour 5
Ref. Reference
topics. (T1)
Replay appropriate pre-
recorded content/
During 1.4 Introduction to Ratio Chapter 3, 4, 5, and 6 of text

CH Analysis (T1)
Calculation of all key ratios
including Activity,
Liquidity, Solvency,
Profitability and Valuation
ratios and their
interpretation;
Calculation of all key ratios
including Activity,
Liquidity, Solvency,
Profitability and Valuation
ratios and their
interpretation
Application of Dupont
Analysis and its
interpretation
Post CH 1.4 Review reference chapters Chapter 3, 4, 5, and 6 of text

from textbook; replay (T1)
assigned homework
Contact Hour 6
Ref. Reference
Pre CH 1.5 Review previous week's Chapter 8, 9 of text (T1)

topics. Replay appropriate pre-
recorded content/ courseware
(module wise)
During 1.5 Basic principles of Time Chapter 8, 9 of text (T1)

CH Value of Money.
Calculation of FV, PV of a
single sum of money as
well as for an annuity.
Differentiate between an
Ordinary Annuity and an
Annuity Due and relevant
calculations. Concept of
perpetuity;
Calculate the annual
percentage yield or
effective annual rate of
interest and explain how it
differs from nominal
interest rate.
Relevant applications of
TVM.
Post CH 1.5 Review reference chapters Chapter 8, 9 of text (T1)

assigned homework
Contact Hour 7
Ref. Reference
Pre CH 2.1 Review previous week's Chapter 10 of text (T1)

(module wise)
During 2.1 Understand the relationship Chapter 10 of text (T1)

CH between Risk and Return;
Impact of Inflation on
Return
Post 2.1 Review reference chapters Chapter 10 of text (T1)

CH from textbook; replay
assigned homework
Contact Hour 8
Ref. Reference
Pre CH 2.2 Review previous week's Selected Journal Articles (to

topics. be provided later)
(module wise)
During 2.2 Understand the Selected Journal Articles (to

CH Term structure of interest be provided later)
rates and its implications
Post 2.2 Review reference chapters Selected Journal Articles (to

CH from textbook; replay be provided later)
assigned homework
Contact Hour 9
Ref. Reference

(module wise)
During 2.3 Classification of risk, etc.; Selected Journal Articles (to

CH Understand Business risk be provided later)
vs. Financial risk
Post CH 2.3 Review reference chapters Selected Journal Articles (to

from textbook; replay be provided later)
assigned homework
Contact Hour 10
Ref. Reference

(module wise)
During 2.4 Understanding Operating Selected Journal Articles (to

CH Leverage, Financial be provided later)
Leverage and Total
Leverage
Applications of Break-even
analysis
Post 2.4 Review reference chapters Selected Journal Articles (to

CH from textbook; replay be provided later)
assigned homework
Contact Hour 11

Ref. Reference
Pre CH 1.1 to Review all topics covered All appropriate chapters of text
2.4 to date. covered to date (T1)
(module wise)
During 1.1 to Review of key topics/ All appropriate chapters of text
CH 2.4 Preparation Tips for Mid covered to date (T1)
Semester Exam
Post CH 1.1 to Review reference chapters All appropriate chapters of text

2.4 from textbook; replay covered to date (T1)
videos as needed to clarify Replay appropriate pre-
understanding; review recorded content/ courseware
homework problems (module wise)
Contact Hour 12
Ref. Reference

(module wise)
During 3.1 Understanding the Chapter 14 of text (T1)

CH relevance and application
of cost of capital to
business decisions
Determine the cost of
various components of
Capital, including debt, and
equity
Post CH 3.1 Review reference chapters Chapter 14 of text (T1)

assigned homework
Contact Hour 13
Ref. Reference

(module wise)
During 3.1 Calculate the Weighted Chapter 14 of text (T1)

CH Average Cost of Capital
(WACC)
Impact of floatation cost on
cost of capital

assigned homework
Contact Hour 14
Ref. Reference
Pre CH 3.2 Review previous week's Chapter 11, and 12 of text (T1)
(module wise)
During 3.2 Different type of Capital Chapter 11, and 12 of text (T1)
CH expenditure decisions
(Capital Budgeting) and its
importance to business
sustainability
Non Discounted Cash flow
methods of evaluation;
Discounted Cash flow
methods of evaluation
Limitation of the various
methods of evaluation
Post CH 3.2 Review reference chapters Chapter 11, and 12 of text (T1)
assigned homework
Contact Hour 15
Ref. Reference

(module wise)
During 3.3 Risk Analysis in Capital Chapter 13 of text (T1)

CH Budgeting;
Scenario Analysis,
Sensitivity Analysis, etc.

assigned homework
Contact Hour 16
Ref. Reference
Pre CH 4.1 Review previous week's Chapter 22 - 26 of text (T1)
(module wise)
During 4.1 Objective of working Chapter 22 - 26 of text (T1)

CH capital management
Static and dynamic view of
working capital
Factors affecting the
composition of working
capital
Post CH 4.1 Review reference chapters Chapter 22 - 26 of text (T1)

assigned homework
Contact Hour 17
Ref. Reference

(module wise)
During CH 4.1 Determination of working Chapter 22 - 26 of text (T1)

capital - operating cycle
and simulation approaches
Evaluation of working
capital management

assigned homework
Contact Hour 18
Ref. Reference

(module wise)
During 4.2 Financing of current assets Chapter 22 - 26 of text (T1)

CH Management of current
assets;
Management of cash

assigned homework
Contact Hour 19
Ref. Reference
(module wise)
During 5.1 Introduction to theories of Chapter 15, and 16 of text (T1)

CH Capital Structure - MM
Asymmetric Information
theories;
Pecking order theory
Understanding financial
distress and agency costs
assigned homework
Contact Hour 20
Ref. Reference
(module wise)
During 5.2 Determinants of capital Chapter 15, and 16 of text (T1)

CH structure;
Setting a target capital
structure;
assigned homework
Contact Hour 21
Ref. Reference
(module wise)
During 5.3 Dividend vs. Capital Gains: Chapter 17, and 18 of text (T1)
CH What do investors prefer?
Why do companies pursue
a stable dividend policy?
Alternatives to dividend
payments - bonus shares,
stock options, share
buyback, etc.
assigned homework
Contact Hour 22

Ref. Reference
Pre CH 1.1 to Review all topics covered All appropriate chapters of text
5.3 to date. covered to date (T1)
(module wise)
During 1.1 to 5.3 Review of key topics/ All appropriate chapters of text
CH Preparation Tips for covered to date (T1)
Comprehensive Semester
Exam
Post CH 1.1 to 5.3 Review reference chapters All appropriate chapters of text
from textbook; replay covered to date (T1)
videos as needed to clarify Replay appropriate pre-
understanding; review recorded content/ courseware
homework problems (module wise)
Evaluation Scheme:
Legend: EC = Evaluation Component; AN = After Noon Session; FN = Fore Noon Session
No Name Type Duration Weight Day, Date, Session, Time
EC-1 Quiz-I/ Assignment-I Online - 5% September 10 – 20, 2018
Quiz-II Online - 5% October 20 – 30, 2018
Experiential Online - 15% November 10 – 20, 2018
Learning
EC-2 Mid-Semester Test Closed 2 hours 30% 30/09/2018 (AN) 2 PM – 4 PM
Book
EC-3 Comprehensive Open 3 hours 45% 25/11/2018 (AN) 2 PM – 5 PM
Exam Book
Notes:
Syllabus for Mid-Semester Test (Closed Book): Topics in Session Nos. 1 to 16 (contact hours)
Syllabus for Comprehensive Exam (Open Book): All topics (Session Nos. 1 to 32) (contact hours)
Important links and information:

Elearn portal: https://elearn.bits-pilani.ac.in
Students are expected to visit the Elearn portal on a regular basis and stay up to date with the latest
announcements and deadlines.
Contact sessions: Students should attend the online lectures as per the schedule provided on the Elearn portal.
Evaluation Guidelines:
1. EC-1 consists of either two Assignments or three Quizzes. Students will attempt them through the
course pages on the Elearn portal. Announcements will be made on the portal, in a timely manner.
2. For Closed Book tests: No books or reference material of any kind will be permitted.
3. For Open Book exams: Use of books and any printed / written reference material (filed or bound) is
permitted. However, loose sheets of paper will not be allowed. Use of calculators is permitted in all
exams. Laptops/Mobiles of any kind are not allowed. Exchange of any material is not allowed.
4. If a student is unable to appear for the Regular Test/Exam due to genuine exigencies, the student should
follow the procedure to apply for the Make-Up Test/Exam which will be made available on the Elearn
portal. The Make-Up Test/Exam will be conducted only at selected exam centres on the dates to be
announced later.
It shall be the responsibility of the individual student to be regular in maintaining the self study schedule as
given in the course handout, attend the online lectures, and take all the prescribed evaluation components such
as Assignment/Quiz, Mid-Semester Test and Comprehensive Exam according to the evaluation scheme
provided in the handout.

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BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE, PILANI

WORK INTEGRATED LEARNING PROGRAMMES

Course Title Financial Management

CO4 Definition of working capital; Composition and determination of working capital;

Reference Book(s) & other resources

1.2. Key Financial Statements

1.3. Financial Statements Analysis (FSA)

1.4. Ratio Analysis

1.5. Time Value of Money (TVM)

2.2. Term Structure of Interest Rates

2.3. Classification of Risk

2.4. Leverage and Break Even Analysis

3. Cost of Capital and Capital Budgetting

3.2. Capital Budgeting

3.3. Other Considerations

4. Working Capital and Liquidity Management

4.1. Basic Concepts

4.2. Current Assets/ Cash management

5. Dividend Policy and Capital Structure

5.2. Capital Structure Decisions

5.3. Dividend Decisions

LO2 Apply Time Value of Money concepts for valuation.

LO7 Demonstrate solutions to "real" business/ financial problems by employing excel/

Experiential Learning Components:

Module Topic Experiential Learning Component

Academic Term First Semester 2018-2019

Pre CH 1.1 Review Course Handout/ Chapter 1 and 2 of text (T1)

During 1.1 Introductions Chapter 1 and 2 of text (T1)

Post 1.1 Review reference chapters Chapter 1 and 2 of text (T1)

Pre CH 1.1 Review Course Handout/ Chapter 1 and 2 of text (T1)

During 1.1 Shareholder wealth Chapter 1 and 2 of text (T1)

Post CH 1.1 Review reference chapters Chapter 1 and 2 of text (T1)

Pre CH 1.2 Review previous week's Chapter 3, 4, 5, and 6 of text

During 1.2 Introduction to FS; Key Chapter 3, 4, 5, and 6 of text

Post 1.2 Review reference chapters Chapter 3, 4, 5, and 6 of text

Type Content Topic Title Study/HW Resource

Pre CH 1.3 Review previous week's Chapter 3, 4, 5, and 6 of text

During 1.3 Principles of Financial Chapter 3, 4, 5, and 6 of text

Post 1.3 Review reference chapters Chapter 3, 4, 5, and 6 of text

During 1.4 Introduction to Ratio Chapter 3, 4, 5, and 6 of text

Post CH 1.4 Review reference chapters Chapter 3, 4, 5, and 6 of text

Pre CH 1.5 Review previous week's Chapter 8, 9 of text (T1)

During 1.5 Basic principles of Time Chapter 8, 9 of text (T1)

Post CH 1.5 Review reference chapters Chapter 8, 9 of text (T1)

Pre CH 2.1 Review previous week's Chapter 10 of text (T1)

During 2.1 Understand the relationship Chapter 10 of text (T1)

Post 2.1 Review reference chapters Chapter 10 of text (T1)

Pre CH 2.2 Review previous week's Selected Journal Articles (to

During 2.2 Understand the Selected Journal Articles (to

Post 2.2 Review reference chapters Selected Journal Articles (to

Pre CH 2.3 Review previous week's Selected Journal Articles (to

During 2.3 Classification of risk, etc.; Selected Journal Articles (to

Post CH 2.3 Review reference chapters Selected Journal Articles (to

Pre CH 2.4 Review previous week's Selected Journal Articles (to

During 2.4 Understanding Operating Selected Journal Articles (to

Post 2.4 Review reference chapters Selected Journal Articles (to

Type Content Topic Title Study/HW Resource

Post CH 1.1 to Review reference chapters All appropriate chapters of text