Kathmandu University School of Management Course Plan FIN 510: Financial Management (4 Credits)

MBA Course overview Understanding of this course enables the students to develop the skill and concepts that are useful for making corporate financial decisions, which have become so complex due to the challenges and opportunities presented by the recent competitive trends in business. The field of corporate financial management has recently witnessed an exciting period of change and growth. Financial practitioners are increasingly employing new financial management techniques to aid in their decision making. Considering these developments, this course has been designed to familiarize students with how internal or corporate financial management is conducted or how corporate financial decisions are made in a changing context. The class discussions will not only deal with the concepts and principles of making corporate financial decisions but they will also focus attention on their application in real life situations. It will also deal with the problems that arise in making corporate financial decisions through the selected exercises, seminar and cases. The course is also designed to equip the students with tools and techniques of making corporate financial decisions. Course Objective The overall objective of this course is to enable the students to: acquire a sound knowledge of the major corporate financial decisions. gain analytical skills required for making corporate financial decisions. analyze corporate financial decision making practices. understand some of the major empirical evidences. The course introduces the fundamentals of strategic corporate financial decisions (key concepts, principles, tools and techniques, strategies and tactics of making corporate financial decisions) critical to maximizing the value of the firm. Specifically, the course aims at: Introducing the students to strategies for corporate financial analysis. Familiarizing the students with the time value of money concepts and enhance their decision making abilities in finance. Providing with a comprehensive framework to valuation of bonds and stocks. Imparting the knowledge of the cost of capital and its use in corporate financial decision making. Providing the students with an in-depth knowledge of the capital budgeting techniques required for choosing various capital budgeting projects. Familiarizing the students with the concept of financial and operating leverages including their application. Acquainting the students with the tools and techniques of efficient working capital management including their applications. Making the students aware about the significance of dividend decisions including share repurchases, stock dividends, and stock splits. On completion of the course, the students will able to demonstrate an understanding of the major concepts, principles and tools of making corporate financial decisions. Specifically, the students will be able to demonstrate an understanding of: Finance functions in business. Shareholders wealth maximization goal of the firm. Agency problem in business. Financial analysis of corporate firms. Application of time value of money concepts in real life situations. Valuation of bonds and determining yield to maturity. Valuation of common stocks for dividend paying and non-dividend paying firms. Valuation of preferred stock. Determination of the cost of capital and its application in real life situations.

Evaluation of the capital budgeting projects. Cash flow estimation Operating and financial leverage Management of working capital and its various components. Dividend policy.

Nature of the Course This is an introductory course in financial management. Accordingly, the key focus of this course is to provide students with the basic concepts, principles, techniques and practices of financial management. It also focuses on preparing the students for specialization courses in finance. Time Demand Many students underestimate the amount of time and effort required to learn financial management. Homework must be completed regularly to succeed in this course. Methods of Instruction Class includes a combination of the following methods/ techniques: Explanations and demonstration of concepts and principles Exercises and problems Case work Presentation Seminar Assignments Review of articles Home work/ assignment Home work/assignment is an essential part of teaching learning process of the course. Each student must solve indicated questions/problems. Home assignment must be submitted on time failing which marks would be deducted. Attendance Students are advised to be regular and punctual in the class. Students must ensure the required attendance to be eligible for appearing the University's Term-End Examination. Students arriving the class late are considered as absent. Calculator & prior reading Each student must bring calculator and prior reading in the class. Delivery of the course In delivering the courses, the faculty member will serve as facilitator of learning only. Students are advised to go through the suggested readings on the topic in advance. The students will be expected to come to class having read all assigned readings (text chapters, cases, and articles) and ready to share and discuss. Case Analysis and Presentation The student is expected to read the case assigned by the instructor thoroughly and address the issues. A report on the case analysis should be submitted to the instructor before presentation. The case analysis and presentation can be completed

in-groups of students. Each student should actively participate in analysis and presentation failing which marks would be deducted. The end-term exam will consist of case analysis for which students should prepare themselves accordingly. Session Plan Each session will consist of three hours net. The session plan of the course is as follows: Sessi Topic Prior Exercises & assignments Further reading on Reading 1 Introduction to financial RSP BE: Chap. 1 Quiz next class management Chap. 1 2 Understanding financial RSP BE: Chap. 2 Exercises: SP1 & 2, P1, 2, & 8. statements & cash flows Chap. 2 Quiz next class Financial analysis RSP BE: Chap. 3 Exercises: SP3 & 7. P1 to 3, & 5 to 7. Chap. 3 Quiz next class 3 Time value of money RSP Chap. 5 Case to be provided RSP Chap.11 RSP Chap. 6 RSP Chap. 7 Case to be provided RSP Chap. 8 RSP Chap. 9 RSP Chap.10 Case to be provided RSP Chap. 12 RSP Chap. 13 RSP Chap. 14 RSP Chap. 15 RSP Chap. 16 Case to be provided RSP-1 Exercises: SP6 to 8, & 13 to 15. P1 to 5, 9 to 15, & 18 to 21. Quiz next class Submission of case analysis report. Presentation by groups & quiz. Quiz next class Exercises SP 1,2,3 & 9. P1&2 Quiz next class BE: Chap. 8

Case 1: Financial analysis Operating & financial leverage Bond valuation Valuation of stocks

RSP: Chaps 2 & 3; BE: Chap. 3 BE: Chap. 16

6 7

Exercises: SP1 to 6. P1 to 3. Quiz next class Exercises: SP6 to 9, SP11 to 13. P10,
12 & 13. Quiz next class Submission of case analysis report. Presentation by groups & quiz. Quiz next class

BE: Chap. 9 BE: Chap. 10

Case 2: Stock versus Bonds Cost of capital Capital budgeting Cash flow estimation Case 3: Capital budgeting Current assets management Cash management

RSP: Chaps. 6/7 BE: Chaps. 9/10 BE: Chap. 11 BE: Chap. 13 BE: Chap 14 RSP: Chaps 9 & 10; BE: Chap 13. BE: Chap. 22 BE Chap. 22 BE: Chap. 22 VH: Chap. 15 BE: Chap. 18 As specified above. -

9 10 11 12 13

Exercises: Chap 9: SP1 & 2. P1, 2, 5 & 6. Chap 10: SP3 to 6. Quiz next class Submission of case analysis report. Presentation by groups & Quiz Exercises: SP2, & 3. P4. Quiz next class

Exercises: SP1 to 4, & 7. P1, 7 & 13. Quiz next class

14

Receivables management Inventory management

Exercises: SP1, 2, 4 & 5. Quiz next class

15 16 17

Dividend policy Case 4: Inventory mgmt. Seminar

Exercises: SP1 & 2. Quiz next class Exercises: SP1, 2, 4, & 5. Quiz next class Exercises: SP8, P3, & 7. Quiz next class Submission of case analysis report. Presentation by groups & quiz Synopsis due.

18

19 Books

Submission of case analysis report. Presentation by groups & quiz Quiz next class Remaining presentations & summing up of the course. Case 5: Dividends Case to be provided

RSP: Chap 16; BE: Chap 18

BE: Eugene F. Brigham, and Michael C. Ehrhardt, Financial Management: Theory and Practice, Thomson Asia, Singapore. BM: Richard Brealey and Stewart Myers, Principles of Corporate Finance, McGraw Hill Book Company, New York WC: J. Fred Weston and Thomas E. Copeland, Managerial Finance, The Dryden Press, New York. VH:James C. Van Horne, Financial Management and Policy, Prentice Hall of India, New Delhi. RSP: Radhe S. Pradhan, Financial Management, Third edition, Buddha Academic, Kathmandu, 2010. RSP-1: Radhe S. Pradhan, 'Research in Nepalese Finance', Second edition, Buddha Academic, Kathmandu, 2006. CW: Thomas E. Copeland and J. Fred Weston, Financial Theory and Corporate Policy, Addison-Wesley Publishing Company, New York. Session objectives The breakdown of session objectives has been set as under: Session Objectives Session 1 Students identify the importance of corporate financial decisions, finance functions, goals of the firm and agency problem in business. Session 2 Students clarify their understanding of financial statements and cash flows and also undertake financial analysis. Session 3 Students develop the understanding of the concept of time value of money. Session 4: Students undertake analysis and presentation of case 1. Sessions 5 Students understand the concept of operating & financial leverage Sessions 6 Students understand the concepts and techniques of bond valuation. Session 7 Students understand the concepts and techniques of stock valuation. Session 8 Students undertake analysis and presentation of case 2. Session 9 Students understand the cost of capital concept and use them in choosing the project. Session 10 Students understand the techniques of capital budgeting. Sessions 11 Students understand the techniques of cash flow estimation in capital budgeting. Session 12 Students undertake analysis and presentation of case 3. Session 13 Students understand the theory & practice of current assets management & cash management. Session 14 Students understand the theory & practice of receivables and inventory management. Session 15 Students understand the theoretical & practical implications of dividend policy. Sessions 16 Students undertake analysis and presentation of case 4. Sessions 17 Students give presentations in the seminar.

Sessions 18 Students undertake analysis and presentation of case 5. Sessions 19 Remaining presentations and summing up of the course. Laptop Laptop should be shut down during the class hours failing which marks will be deducted from that days quiz or presentation. Evaluation Criteria The internal evaluation is one of the important activities of this course. Among others, it consists of class participation, quiz, home assignment, seminar, and case analysis. The quiz will be administered at the end of the discussion on almost every topic as notified by the instructor. The students academic progress is evaluated through out the term. The break up of the evaluation for this course is as under: Items Quiz & class participation Home assignment Seminar Case analysis & presentation (in groups) End Term Exam TOTAL Internal evaluation calendar The internal evaluation calendar would tentatively be as under: Internal evaluation criteria Weight Quiz (Introduction) Quiz (Fin. Statements & analysis) Case 1: Ana. & pres.(fin analysis) Quiz (Time value of money) Quiz (Leverage) Quiz (Bond valuation) Quiz (Stock valuation) Case 2: Ana. & pres. (Stock vs. Bonds) Quiz (Cost of capital) Quiz (Capital budgeting) Quiz (Cash flow estimation) Case 3: Ana. & pres. (Capital budgeting) Quiz (Cur.assets & cash) Quiz (Recs. & Inv) Quiz on dividends Case 4: Ana. & pres. (Inventory) Seminar Case 5: Ana. & pres.(Dividends) Additional quizzes Home assignments End term exam Total Recommended Journals / Magazines / Newspapers Students are advised to consult at least some of the internationally, regionally, and nationally renowned journals, magazines and newspapers, such as Journal of Finance, Financial Management, American Economic Review, Quarterly 1.7% 1.7% 6.8% 1.7% 1.7% 1.7% 1.7% 6.8% 1.7% 1.7% 1.7% 6.8% 1.7% 1.7% 1.7% 6.8% 6.8% 6.8% 3.4% 5.1% 30.0% 99.7% Date of assigning Session 1 Session 2 Session 2 Session 3 Session 5 Session 6 Session 7 Session 5 Session 9 Session 10 Session 11 Session 10 Session 13 Session 14 Session 15 Session 16 Session 15 Session 15 To be notified To be notified To be notified Deadline Session 2 Session 3 Session 5 Session 4 Session 6 Session 7 Session 9 Session 8 Session 10 Session 11 Session 12 Session 12 Session 14 Session 15 Session 16 Session 16 Session 17 Session 19 To be notified To be notified To be notified Results Next class Next class Next class Next class Next class Next class Next class Next class Next class Next class Next class Next class Next class Next class Next class Next class Next class Next class To be notified To be notified To be notified No. 14 3 1 5 1 Weight 23.8% 5.1% 6.8% 34.0% 30.0% 99.7%

Journal of Economics, Review of Economics and Statistics, Journal of Corporate Finance, Journal of Banking and Finance, Journal of Empirical Finance, Journal of Business, Journal of Political Economy, Journal of Financial Economics, Pacific Basin Journal, Journal of Econometrics, Econometrica, Financial Practice and Education, The Economic Times, Economic and Political Weekly, and so on. Internet Resources Students are advised to consult the websites provided at the end of each chapter of the book (RSP). Seminar The course requires the students to give a seminar. The objective of the seminar is twofold: (1) to expose the students to some of the selected finance literature at least on one or more important areas, and (2) to enable the students to understand practice of financial management tools in a real life situation. Class format: Class time will be devoted almost exclusively to the presentation and discussion of selected articles. Seminar presentations can be undertaken in groups of .. students. Each group will be assigned to present and lead the discussion on the article assigned. Each student of the group must actively participate in the presentation failing with marks will be deducted. The Faculty shall provide articles at least one week in advance. Each student should read all the articles thoroughly and must be prepared to discuss and answer the questions/ issues raised by the Faculty or fellow students at the end of the session. Seminar Schedule Topic/Article Approximate time Group responsible Presentation 1: Introduction 5 mins. Faculty Reading 1 20 mins. Group 1 Discussion 20 mins. Faculty Presentation 2: Introduction 5 mins. Faculty Reading 2 20 mins. Group 2 Discussion 20 mins. Faculty Presentation 3: Introduction 5 mins. Faculty Reading 3 20 mins. Group 3 Discussion 20 mins. Faculty Presentation 4: Introduction 5 mins. Faculty Reading 4 20 mins. Group 4 Discussion 20 mins. Faculty *Except for Reading 1, the other articles are provided in Research in Nepalese Finance. Reading 1: Reading 2: Reading 3: Reading 4: Erika Gilbert and Alan Reichert, The practice of financial management among large United States corporations, Financial Practice and Education, Volume 5, No. 1 (Spring/Summer 1995), pp. 16-23. Capital budgeting practices in Nepal: A Survey, 'Research in Nepalese Finance', (Kathmandu: 2006), pp.1-10. (Article no. 3). Estimates of inventory demand by Nepalese Corporations, 'Research in Nepalese Finance', (Kathmandu: 2006), pp.185-193. (Article no. 10). Effect of dividends on common stock prices: The Nepalese evidence, 'Research in Nepalese Finance', (Kathmandu: 2006), pp.1-10. (Article no. 2).

Synopsis Each group should prepare and distribute a brief outline or synopsis (maximum 2 pages) of the paper the group is presenting to the other class members and the Faculty before the presentation begins (Specimen to be provided by the Faculty). The synopsis should begin with course title, name of the all students in the group, and full description of articles (author/s, title of the article, name of the journal, volume and number, year/ month of publication, and pages). The synopsis, among others, should consist of such things as purpose of the study, methodology, (nature and sources of data, models and variables used, etc.), analysis of data, major findings, and conclusions/implications. Xxx