AURO UNIVERSITY

(INDIA)

Bachelor of Business Administration

Batch 2017-20
Module
BUSINESS FINANCE

SEMESTER-III

Module Leader Ms. Indrani Sengupta

www.aurouniversity.edu.in

AU, August 2018

 Module Introduction
In today’s dynamic and competitive business environment, a key ability for a successful manager is to use a
knowledge - based framework to analyse and make decisions and to take their business to the peak.

Do you think a career in finance might be for you? Consider the main areas of the financial professional
field. The financial system is the means through which value is assigned to and invested in each part of the
world's economy. Finance is about how people and organizations do or should create and manage wealth
through managing expenses and developing investment portfolios. The financial sector provides tools for
making decisions about how and where money, or liquid assets, should be spent or invested and for how
long. Groups with more capital than they can use for themselves spend a lot of time and effort making
decisions about where the best place to invest it, in an attempt to get the most ideal, or highest return on their
investment in a given amount of time. The competition between organizations and individuals to attract
these investments motivates them to invent better products & systems and create better jobs for more people.

Each week you will be expected to attend lecture, seminar and workshop. All class lectures and other
study materials will be available to you on the Virtual Learning Environment of Auro University (VLE).

Module Leader:
Ms. Indrani Sengupta
Tel: 91-261-4088169.

E-mail: indrani.sengupta@aurouniversity.edu.in

Contact hours: Feel free to come to my office whenever you have doubts relating to the course.

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 Module Objectives
Knowledge and Understanding
 Examine the relevant principles of business and finance.
 Analyse the problem solving skills.
 Assess the set of alternative solutions
 Identify and Evaluate complexities of decision making

Course Prerequisites:
Students are expected to have a basic understanding of finance and the business activities happening across
the globe and above all to how to implement these things in an applicative manner.

Assessment structure (Formative & Summative):

Assessments for this course will consist of Formative (50% weightage) as well as Summative (50%
weightage) Components. The formative component will be conducted from time to time on an internal basis
whereas the Summative assessment will be conducted through an End term Examination.

Students are instructed to work very diligently for these assessments as good performance will not only help
them in scoring good marks but also help them in thorough in-depth understanding of the subject.

Students are also instructed to make submissions in time. Late submissions will not be accepted under any
circumstances. Students will not be allowed to take a repeat of any assessment under any
circumstances. Module leader reserves the right for allowing any student to submit an assignment in lieu of
any assessment component in extreme medical reasons duly verified by the Program office.

The subject matter covered in this course will be assessed by:

Mid-term examination: : 20% WEIGHTAGE

Coursework and Presentations : 30% WEIGHTAGE

End term examination: : 50% WEIGHTAGE

Continuous Assessment Details (Formative & Summative):

1. MID-TERM : 20%
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This will take place at the end of week 9 and the topics will be cumulative till week 8. It will be of 50 marks. The
paper will mostly focus on the clear understanding of the concepts taught in the class and the reflective
learning’s made, the pattern of the question paper in mid-term will be mostly the applicative part and the
numerical ability testing.

2. COURSEWORK : 10% ( weekly worksheets & attendance)

10% weightage is for the coursework that the students will be doing in the seminar and workshop classes
on a weekly basis. The marks for the same will be in the hands of the module leader. The students can get a
minimum of 0 to a max of 10 depending upon the interest and the inclination towards solving the
worksheets in the seminar and workshop classes.This course work will be a full numerical & applicative
paper and hence the following is expected from the students.

Marks in the coursework and exams will be determined on the basis of –

i. The correct answers (for numerical)

ii. Relevant, accurate and complete answers with ample demonstration of understanding and
depth of the course material. Intelligent use of appropriate theoretical constructs. Original
perspectives or insights and logical arguments, well ordered and eloquent answers with
appropriate examples and abundant illustrative data

3. Presentations 20%
The presentations will be held in the week 16 & 17, for which the students are expected to collect
their topics from the module leader by the end of 13th week.

4. FINAL EXAM: Weightage: 50%

The final exam will be graded out of 100 marks. The portions covered till week 18 will be assessed in the
final exam. It will include mostly applicative questions and Numerical type questions. The objective of the
final exam is to apply, relate, analyse, compare and categorize your understanding of the lectures and the
ability to successfully apply the knowledge in real world problems.

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 A Note on Equal Opportunities
Auro University aims within its courses to provide equal access to learning to students from diverse
backgrounds, irrespective of their gender, race, disability, sexual orientation, age, religion and
maturity. If you feel this module is not fulfilling this aim, please take it up with the module leader,
or ask your student representative to do so. Feel free also to comment on this aspect of the module
in the evaluation.

Recommended Readings:

The Main Text Book: for the course which is recommended for purchase
1. Essentials of Financial Management (4th Edition) by I.M. Pandey published by Vikas
Publishing House Ltd.

Alternative Texts
1. Fundamentals of Financial management by Van Horne
2. Bhalla, V K. Financial Management and Policy. 2nd ed., New Delhi, Anmol, 1998.
3. Brealey, Richard A and Myers Stewart C. Principles of Corporate Finance. 5th ed., New Delhi,
McGraw Hill, 1996.
4. Van Horne, James C. Financial Management and Policy, 10th ed., New Delhi, Prentice Hall of
India, 1997.
5. Khan & Jain, Financial Management
6. Chandra Prasanna Financial Management, TMH
7. Maheshwari S.N. Elements of Financial management

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 BLOCK PLAN: Lectures Weekly Coverage:

COVERAGE
Week Chapter Textbook

1 Chapter 1
Introduction to basics of financial management
2&3 Chapter 2
Time value of money
4 Chapter 3
Sources of Long term finance
5 Chapter 4
Valuation of Shares & Debentures
6 Chapter 9
Capital Budgeting Techniques
7 Chapter 11
Risk analysis in Capital Budgeting
8 Chapter 8
Cost of Capital
9
MID TERM
10 Chapter 12
Operating and Financial Leverages
11 & 12 Chapter 13
Capital Structure : Theory & Practice
13 Chapter 14
Dividend Theory
14 Chapter 15
Nature of Working Capital
15 i Chapter 16
Cash Management
15 ii Chapter 18
Inventory Management
16 & 17
Presentations
18 All Chapters
Revision

AU, August 2018

 Using unfair means in assessments
All assessments are intended to determine your individual skills, abilities, understanding and
knowledge. Cheating is defined as obtaining an unfair academic advantage and any of you found
using any form of cheating, attempting to cheat or assisting someone else to cheat may be subject to
disciplinary action in accordance with the AU’s Disciplinary Procedure. The university takes this
issue very seriously and you may be expelled or have your degree withheld for cheating in
assessments. If you are having difficulty with your work it is important to seek help from your tutor
rather than be tempted to use unfair means to gain marks. Do not risk losing your degree and all the
work you have done. AU defines a number of different forms of cheating, although any form of
cheating is strictly forbidden. These are:

 Submitting other people's work as your own - either with or without their knowledge.
This includes copying in examinations; using notes or unauthorised materials in
examinations
 Impersonation - taking an assessment on behalf of or pretending to be another student, or
allowing another person to take an assessment on your behalf or pretend to be you
 Plagiarism - taking or using another person's thoughts, writings or inventions as your own.
To avoid plagiarism you must make sure that quotations, from whatever source, are clearly
identified and attributed at the point where they occur in the text of your work by using one
of the standard conventions for referencing. It is not enough just to list sources in a
bibliography at the end of your essay or dissertation if you do not acknowledge the actual
quotations in the text. Neither is it acceptable to change some of the words or the order of
sentences if, by failing to acknowledge the source properly, you give the impression that it
is your own work.

 Collusion - except where written instructions specify that work for assessment may be
produced jointly and submitted as the work of more than one student, you must not collude
with others to produce a piece of work jointly, copy or share another student's work or lend
your work to another student in the reasonable knowledge that some or all of it will be
copied
 Duplication - submitting work for assessment that is the same as, or broadly similar to,
work submitted earlier for academic credit, without acknowledgement of the previous
submission
 Falsification - the invention of data, its alteration, its copying from any other source, or
otherwise obtaining it by unfair means, or inventing quotations and/or references.

BUSINESS FINANCE

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 Week 1: Introduction and basics of Financial Management
Learning objectives:
• Introduction to the Finance function, its scope, importance and its organization,
• Objectives of Financial Management
• Discussion on Financial goals and focus on SWM principles,
• Discussion on agency problem;

Lecture outline:
• Explain the nature of finance and organization of the finance function
• Focus on the Shareholder Wealth maximization
• Difference between Profit Maximization and Wealth Management

Readings for Week 1

Chapter 1, IM Pandey, Essentials of Financial Management (4th Edition)

Workshop & Seminar:

Going through Module Handbook and explaining student expectations and
Assessment Components

Week 2 &3: Concept of Value and Return

Learning objectives:

• What gives money its time value?

• Methods of Calculating Present and Future Value
• Using the Present Value technique (discounting) in financial decisions
• Concept of IRR;

Lecture outline:
• Future Value
• Future Value of a Single Cash Flow
• Future Value of an Annuity
• Present Value
• Present value of a Single Cash Flow
• Present Value of an annuity
• Present value of an even cash flow
• Constantly growing Annuity
• Yield or IRR
Readings for Week 2 & 3
Chapter 3, IM Pandey, Essentials of Financial Management (4th Edition)
Workshop & Seminar:
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 Solving problems related to Time value of Money

Week 4 Sources of long-term finance

Learning Objectives:
• Explain the features of ordinary shares
• Focus on the benefits and valuation of right shares
• Discuss the pros and cons of debentures and preference shares
• Highlight the features of term loans
• Explain the features of convertible debentures
• Features of capital market instruments like zero interest debentures or deep discount bonds
• Defined Lease and highlight its true advantages
• Difference between Hire Purchase and Lease Financing
• Project financing as a special mechanism for financing large projects
Lecture outline:
• Characteristic features of Equity shares
• Benefits and Valuation of right shares
• Pros and Cons of Debentures and Preference Shares
• Features of term loans
• Features of Convertible Debentures, Zero interest debentures or Deep Discount bonds
• Leasing; Advantages, Difference between Hire Purchase and Lease Financing
• Project financing

Readings for Week 4

Chapter 2, IM Pandey, Essentials of Financial Management (4th Edition)

Workshop & Seminar:
Solving problems related to Long Term Sources of Finance

Week 5: Valuation of Shares & Debentures

Learning objectives:

• Explain the fundamental characteristics of ordinary shares, preference shares and bonds (or
debentures)
• Show the use of the present value concepts in the valuation of shares and bonds
• Focus on the users and misusers of P/E ratio

Lecture outline

 Characteristics of ordinary shares, preference shares, debentures

 Valuation of shares and bonds using the present value concept
 Price-earnings (PE/) ratio
 Concept of Return and Risk and the relationship between them

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 Readings for Week V
IM Pandey, Essentials of Financial Management (4th Edition)
Workshop & Seminar:
Solving problems related to Valuation of Shares and Debentures

Week 6: Capital Budgeting

Learning Objectives
• Understand the basic concepts of capital investment decisions and discuss their features
• Understand the steps involved in assessing and evaluating capital investment decisions
• Understand and Analyse various Capital investment selection techniques (Payback, ARR,
NPV, IRR, PI)
• Appreciate the conceptual difference between Profit and Loss

Lecture outline
• Introduction to the nature of investment decisions;
• Discussion of non-discounted and discounted methods of evaluating projects;
• Determining the cash flows for Investment analysis;
• Discuss the approach of calculating incremental cash flows
Workshop & Seminar:
Solving problems related to various methods of evaluating Capital Budgeting decisions
Readings for Week 5
Chapter 9 IM Pandey, Essentials of Financial Management (4th Edition)

Week 7: Risk Analysis in Capital Budgeting

Learning objectives:
• Discuss the concept of risk in capital budgeting decisions
• Understand commonly used techniques of handling risk
• Explain the decision tree approach in sequential investment decisions
Lecture Outline
• Risk involved in capital budgeting decisions
• Techniques of handling risk
• Decision tree approach in sequential investment decisions
Workshop & Seminar:
Statistical techniques for risk analysis and capital budgeting will be dealt in the class.

Reading for Week 6

IM Pandey, Essentials of Financial Management (4th Edition)
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Week 8: Cost of Capital

Learning Objectives
• Understand the concept of cost of capital and its rationale
• Analyse the various factors affecting the cost of capital
• Understand the determinants of cost of capital
Lecture outline
• Explain the general concept of Opportunity Cost of Capital
• Determining the component cost of capital;
• Learning to calculate the component cost of capital
• Learning to calculate Cost of Equity shares using Dividend Valuation approach and CAPM
• Learning to calculate weighted average cost of capital and discussing the relevance of
historical weights v/s market weights

Workshop & Seminar:

Solving problems related to Cost of Capital
Readings for Week X
Chapter 8 IM Pandey, Essentials of Financial Management (4th Edition)

Week 9: MID TERM

Week 10: Operating and Financial Leverage

Learning objectives:
• Understand the rationale of leverage
• Discuss the different types of leverage and their importance in business
• Understanding the risk and return implications of financial leverage;
• Determining the difference between operating risk and financial risk;
• Analyzing the combined effect of financial and operating leverage.

Lecture Outline
• Introduction to the concept of financial and operating leverage;

• Understand the concept of operating leverage; calculation of the degree of operating leverage and
its contribution to business risk
• Understand the concept of financial leverage and the calculation of degree of financial
leverage and its contribution to financial risk
• Understand the concept of EBIT- EPS analysis
Workshop & Seminar:
Numerical based problems on Financial and Operating Leverage

AU, August 2018

 Reading for Week XIII
Chapter 12 IM Pandey, Essentials of Financial Management (4th Edition)

Week 11 & 12: Capital Structure: Theory and Practice

Learning objectives:
• Understand theories of the relationship between capital structure and the value of firm
• Highlight the differences between the mm view and the traditional view on the relationship
between capital structure and the cost of capital and the value of the firm
• Focus on the interest tax shield advantage of debt as well as its disadvantages in terms of cost of
financial distress
• Discuss the pecking order theory of capital structure
• Study the determinants of capital structure in practice

Lecture Outline

• net income theory and the traditional theory of capital structure

• the net operating income approach
• MM Hypothesis without taxes
• MM Hypothesis under corporate taxes
• value of interest tax shield
• value of the leverage firm
• financial distress and optimum Capital structure
Workshop & Seminar:
Numerical based problems on Capital Structure
Reading for Week X & XI
Chapter 13, IM Pandey, Essentials of Financial Management (4th Edition)

Week 13: DIVIDEND THEORY AND PRACTICE

Learning objectives:
• Emphasizing the importance of dividend policies.
• Understanding the bird-in-the-hand argument for paying current dividends;
• Highlight the factors that influence a firm’s dividend policy.
• Discussing the logic of dividend irrelevance, focusing on the importance of bonus shares and the
share buyback procedure and mechanism.

Lecture Outline Week XII:

• Highlighting the necessity of practical considerations in dividend policy.
• Discussing various mechanisms of uncertainties in dividend.
• Discussing the process of dividend relevance.
• Discussing the various facets of dividend policies.
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 Workshop & Seminar:

Numerical based problems on Dividend Theory and its various models, Walton, Gordon’s and
the MM hypothesis, the practical considerations.

Reading for Week XII

Chapter 14 IM Pandey, Essentials of Financial Management (4th Edition)

Week 14: Nature of Working Capital

Learning objectives:
 Understanding the need for investing in current assets
 Elaborate the concept of Operating cycle
 Highlight the necessity if managing current assets and current liabilities
 Explain current assets investment and financing
 Focus on the proper mix of short term and long term financing for current assets

Workshop & Seminar:

Numerical based problems

Reading for Week XIII

• Chapter 15 IM Pandey, Essentials of Financial Management (4th Edition)

Week 15: Cash Management

Learning objectives:
 Explain the reasons for holding Cash
 Underline the need for Cash Management
 Discuss the techniques of preparing cash budget
 Focus on management of cash collection and disbursement

Workshop & Seminar:

Numerical based problems

Reading for Week XIV

• Chapter 16 IM Pandey, Essentials of Financial Management (4th Edition)

Week 15: Inventory Management

Learning objectives:
 Highlight the need for and nature of Inventory

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  Explain the techniques of Inventory Management
 Focus on the need for analyzing inventory problem as an investment decision
 Discuss the process for managing inventory

Workshop & Seminar:

Numerical based problems

Reading for Week15

• Chapter 18IM Pandey, Essentials of Financial Management (4th Edition)

Week 16 & 17: Presentations

Week 18: Revision

Revision and doubt clearing session

Student Assessment of Module

I hope that you found this module challenging but worthwhile. Each year, the module changes
slightly, in part as I think of ways I can do things better and in part because students suggest
possible improvements. I would appreciate your comments on what I got right and what I could
improve on. I would therefore be grateful if you could anonymously complete the following table,
adding any additional observations you may have on the reverse. A summary of student appraisals is
reported at Field Meetings, attended by student representatives, and I would be happy to provide a
copy to any student who asks for one.

1 = Strongly Agree 2 = Agree 3 = Neither Agree nor Disagree 4 = Disagree

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 5 = Strongly Disagree
1 2 3 4 5

MODULE as a whole:

was well organised

had an acceptable workload

gave me confidence in my understanding of

subject
was relevant to my main field/s of study

was adequately resourced in terms of learning

support material

was adequately resourced in terms of

accommodation and physical facilities
The LECTURES:

were interesting

were clearly delivered

The SEMINARS:

were interesting

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