Syllabus
Unit 1
: Financial management function and its environment
The nature and purpose of financial management – relationship between financial management and management accounting
Financial objectives and relationship with corporate strategy and objectives – shareholder wealth maximization – profit maximization – earnings per share growth
Stakeholders and impact on corporate objectives – conflict between different objectives – agency theory – measuring corporate objectives – ratio analysis – corporate governance regulations
Financial and other objectives in not-for-profit organisations – value for money audits – three Es for not-for-profit-Organisation
The economic environment for business – macroeconomic policy targets – role of fiscal, monetary, interest rate and exchange rate policies in achieving macroeconomic policy targets – competition policy – government assistance for business – green policies – corporate governance
The nature and role of financial markets and institutions market – role of financial intermediaries – variety of security in terms of risk and return – impact of fintech
The nature and role of money markets – the role of banks and other financial institutions in the operation of the money markets – interest-bearing instruments – discount instruments – derivative products
Unit 2
Working capital management and Investment appraisal
The nature, elements and importance of working capital – cash operating cycle – accounts payables and receivables management techniques – liquidity and activity ratios – Economic Order Quantity – Just In Time – preparing cash flow forecasts– trade credit – bulk discounts – early settlement discounts – managing foreign accounts payables – – centralized treasury management – Baumol model and the Miller-Orr model – investing short term
Determining working capital needs and funding strategies – calculate the level of working capital – working capital cycle working capital funding strategies – distinction between permanent and fluctuating current assets – matching principle – relative costs and benefits of aggressive,
conservative and matching funding policies – management attitudes to risk Investment appraisal techniques – relevant cash flows – payback period – discounted payback period – accounting rate of return – Net Present Value – Internal Rate of Return – allowing for inflation and taxation –– superiority of Discounted Cashflow methods over non-Discounted Cashflow methods – risk and uncertainty- sensitivity analysis to investment projects – probability analysis to investment projects – techniques of adjusting for risk and uncertainty in investment appraisal – simulation – adjusted payback – risk-adjusted discount rates
Specific investment decisions (Lease or buy, asset replacement, capital rationing) – leasing and borrowing to buy using the before- and after-tax costs of debt – asset replacement decisions – investment decisions under single-period capital rationing – Profitability Index – Net Present
Unit 3
Business finance
Sources of, and raising, business finance -short-term sources of finance – overdraft – short- term loan – trade credit – lease finance – long-term sources of finance – equity finance – debt finance – lease finance – venture capital – methods of raising equity finance – rights issue – placing – public offer – stock exchange listing – Islamic finance – concept of riba – Murabaha – Ijara – Mudaraba – Sukuk – Musharaka .- internal sources of finance – retained earnings – increasing working capital efficiency – relationship between dividend policy and the financing decision – alternatives to cash dividends – legal constraints, liquidity, shareholder expectations and alternatives to cash dividends
Estimating cost of capital – dividend growth model – systematic and unsystematic risks – capital asset pricing model – estimating cost of debt – estimating Weighted Average Cost of Capital using book value and market value weightings
Sources of finance and their relative costs – risk-return relationship – creditor hierarchy – problems high levels of gearing – impact of sources of finance on financial position – gearing ratio analysis – cash flow forecasting – lease or buy – relationship between cost of capital and value of company – project specific coat of capital – Capital Asset Pricing Model and cost of capital
Capital structure theories – traditional view – Modigliani and Miller capital structure theories –
pecking order theory
Finance for small and medium sized businesses – business angel financing -government assistance – supply chain financing – crowdfunding & peer-to-peer funding.
Unit 4
Business Valuation
Nature and purpose of the valuation of business and financial assets – reasons for valuing businesses and financial assets – limitations of information
Models for valuation of shares – asset-based valuation models – net book value (statement of financial position) basis – net realisable value basis – net replacement cost basis – income- based valuation models – Price / Earnings ratio method – earnings yield method – cash flow-based valuation models – dividend valuation model – the dividend growth model – discounted cash flow basis.
The valuation of debt and other financial assets – valuation methods – irredeemable debt – redeemable debt – convertible debt – preference shares
Efficient Market Hypothesis (EMH) and practical considerations in the valuation of shares
– weak form efficiency, semi-strong form efficiency and strong form efficiency – practical considerations in the valuation of shares – significance of investor speculation – behavioural finance
Unit 5
: Risk management and technology and employability skills
The nature and types of risk and approaches to risk management – foreign exchange risk – translation risk – transaction risk – economic risk – interest rate risk – gap exposure – basis risk. Causes of exchange rate differences and interest rate fluctuations – balance of payments – purchasing power parity theory – interest rate parity theory – four-way equivalence – forecast exchange rates – purchasing power parity – interest rate parity – structure of interest rates and yield curves – expectations theory – liquidity preference theory – market segmentation
Hedging techniques for foreign currency risk – currency of invoice – netting and matching
– leading and lagging – forward exchange contracts – money market hedging – asset and liability management – foreign currency derivatives used to hedge foreign currency risk
Hedging techniques for interest rate risk – matching and smoothing – asset and liability management – forward rate agreements – interest rate swaps – collars
Use computer technology to efficiently access and manipulate relevant information
Work on relevant response options, using available functions and technology, as would be required in the workplace
Navigate windows and computer screens to create and amend responses to exam requirements, using the appropriate tools
Present data and information effectively, using the appropriate tools
Objective and Outcomes
Course Objective:
The objective is to develop students with the knowledge and skills expected of a finance manager, working in finance function, in relation to understanding finance function and its environment, managing working capital, investment, financing, dividend policy decisions and managing risks. It also equips students with latest technology and employability skills to meet industry expectations.
Course Outcomes:
The student will be able to:
CO1: To familiarize the role and purpose of the financial management function within a business and understand economic conditions under which the decisions are made
CO2: To discuss, evaluate and apply various working capital management techniques and equip the skills to use various investment appraisal techniques to select a project adjusting for risk and uncertainty and understand specific investment decisions.
CO3: To understand the various sources of business finance, including dividend policy and how much finance can be raised from within the business and understand cost of capital and other factors that influence the choice of the type of capital raised by the business
CO4: To examine principles underlying the valuation of business and financial assets, including the impact of cost of capital on the value of business and to introduce different risks in business and to comprehend main types of forex and interest rate risks evaluate main techniques used to manage risks in business
CO5: To introduce appropriate digital and employability skills in preparing for and taking the FM examination and to be able to use the relevant functionality and teinchnology professional manner to tackle the examination.
