Business Finance -1 (2303)

Fall 2019 – MBA Morning

Resource person: Muhammad Saleem Umer

Email: msumer@iba.edu.pk Tel: 3810 4700 Extension 2800

Counseling Hours: Monday through Friday: 10.00 am. to 1.00 pm.

Course Objective: This is the first graduate-level finance course aimed at introducing the basic business
finance theory, principles, concepts, tools and their application in financing and investment decisions.
The course will familiarize the students, with the discipline of Finance, its importance in our life, financial;
jargons, instruments, analytical tools, concepts, and framework, leading to crucial decisions. In addition to
theoretical concepts, half of the course time is allocated for their application in local and international
corporates. The course shall lay the foundation for advanced concepts to be covered in Business Finance II

Course outcomes: Upon successful completion of this course the students should be able to identify the
link between the concepts they learnt with the financial decisions they take in their personal as well as
professional lives. At the end they will be able to:
1. Learn financial terminologies, basic concepts, methods, processes and financial environment.
2. Comprehend financial statements, perform rudimentary analysis and interpret key ratios.
3. Understand discounted cash flows and time value techniques to value the assets/investments
4. Grasp debt and equity sources; types, cost, valuation, risk, taxation impact
5. Demystify the valuation process of financial securities and long‐term assets/projects
6. Understanding corporate valuation and financial planning.
7. And be able to correlate their class room learning and real life business environment.

Study Approach: Please don’t approach course material as one of memorizing rules or particular solution
techniques. Develop understanding of the concepts and approach the problems in your own way. In-class
examples/ problems are designed to guide your learning. Exams will test concepts and understanding.

Preparation: Participants are advised to study applicable topics in advance to consolidate their learning.

Study Text: Financial management / by Brigham, Eugene F.

Additional Text: Essentials of Managerial Finance/ by Scott Besley& Eugene F. Brigham

Assignments: The assignments must be submitted on LMS before the deadline.

Quizzes: Quizzes may be announced or unannounced. Best five out of seven shall be taken into account.

Financial Health Clinic: Group exercise will be assigned and supervised. Further guidance shall be provided

Grading Plan: Assignments, quizzes 20

Financial Health Clinic 10
Mid Terms 30
Final Exam 40
Total 100
Week Broad areas of discussion
1 Course Introduction and learning approach
Chapter 1: An Overview of Business Finance and its impact on financial decisions.
Forms of business organizations, goals they pursue. Ethics in Finance.
2 Chapter 2: Financial Statements and reports; significance and limitations.
On and off Balance sheet information, notes, audit observations chairman/Directors
Reports. Financial performance review. Cash flow statement, net and free cash flows.
3 Chapter 3: Analysis of Financial statements, how can readers use financial statements;
what to see and where? Forcing numbers to speak-up; reformatting, trend analysis,
DuPont analysis. Ratios, interpretations and their limitations, EVA, Peer group analysis.
4 Chapter 4: Time value of money. Concept, mechanics, its utility in corporate valuations
& limitations. Compounding and discounting process, annuities, perpetuities, loan
amortization, un-even cash flows, uses in long term project and investment decisions.
5. Chapter 5: Resource mobilization through Debt Instruments, types; Bonds, TFCs, PTCs,
Sukuk. Interest rates; KIBOR, ratting and risk premium, determinants of market rates,
Bond valuation; finding bond yields (market rates), realized returns, Tax credit.
6 Chapter 7: Resource Mobilization through equity sources. Types and features of stocks;
common, preferred, listed in stock exchange, unlisted stock. Corporate and Stock
Valuation; par/ Book and market value, Dividend Discount Model, due diligence.
7 Financial Health Clinic I Assigned to Group A &B
Case: Kohinoor Power
Mid Term Examination
8 Financial Health Clinic II Assigned to Group C & D
Case: Ghani Automobile
9 Chapter 9: Cost of Capital. Capital Corporate valuation and the cost of capital. WAAC.
Cost of debt and tax benefit, cost of preferred stock, cost of common stock, dividend
growth model, floatation cost. Estimating the cost of capital for firms and projects.
10 Financial Health Clinic III Assigned to Group E & F
Case: Summit Bank
11 Chapter 10: Basics of Capital Budgeting. Non-Current Assets; acquiring/upgrading
decisions. Financial feasibility criteria/methods; Projected Cash flows, NPV, IRR, MIRR,
Profitability index, Payback period. Capital budget methods used in practice.
12 Financial Health Clinic IV Assigned to Group G & H
Case: Power Cement
13 Chapter 12: Corporate valuation and Financial Planning: case: Micro Drive Inc.
Evaluating strategic Initiative, projecting Financial Statements, analysis and selection of
strategic plan, Additional Funds Needed, forecasting in dynamic environment.
14 Financial Health Clinic V Assigned to Group I & J
Case : Hira Textile Mills Ltd
Final Examination