CA Inter Financial Management Full Course By CA. Pankaj Sarawagi

Course Content

Paper 8 – Financial Management and Economics for Finance

Section A- Financial Management

1. Financial Management and Financial Analysis

2. Introduction to Financial Management Function

• Objective and scope of financial management

• Role and purpose

• Financial management environment

• Functions of finance executives in an organization

• Financial distress and insolvency

2. Financial Analysis through Ratios

• Users of the financial analysis

• Sources of financial data for analysis

• Calculation and Interpretation of ratios

• Analysing liquidity

• Analysing leverage

• Analysing solvency

• Analysing efficiency/ activity

• Analysing profitability

3. Limitations of ratio analysis

2. Financing Decisions

1. Sources of Finance

• Different Sources of Finance, Characteristics of different types of long term debt and equity finance, Method of raising long term finance

• Different Sources of short term Finance

• Internal fund as a source of finance

• International sources of finance

• Other sources of finance- Sale and leaseback, Convertible debt, Venture capital, Grants etc.

2. Cost of Capital

• Significance of cost of capital

• Factors of cost of capital

• Measurement of costs of individual components of capital

• The weighted average cost of capital (WACC)

• The marginal cost of capital

• Effective Interest rate

3. Capital Structure Decisions

• Significance of capital structure

• Determinants of capital structure

• Capital structure planning and designing

• Designing of optimum capital structure

• Theories of Capital Structure and value of the firm- relevancy and Irrelevancy of capital structure.

• EBIT – EPS Analysis, Breakeven- EBIT Analysis.

• Under/ Over Capitalisation

4. Leverages

• Types of Leverages- Operating, Financial and Combined

• Analysis of leverages

3. Capital Investment and Dividend Decisions

1. Capital Investment Decisions

• The objective of capital investment decisions

• Methods of Investment appraisal

• Payback period, Discounted payback period

• Accounting Rate of Return (ARR)

• Net Present Value (NPV) – The meaning of NPV, Strengths and limitations of NPV method, The working capital adjustment in an NPV analysis, Capital rationing, Equivalent Annual Costs

• Internal Rate of return (IRR)- Limitations of the IRR method, Multiple IRRs

• Modified Internal Rate of Return (MIRR)- Definition and explanation of MIRR, The process for calculating MIRR, Strengths of the MIRR approach

• Profitability Index

2. Adjustment of Risk and Uncertainty in Capital Budgeting Decision

• Probability Analysis

• Certainty Equivalent Method

• Risk-Adjusted Discount Rate

• Scenario Analysis

• Sensitivity Analysis

3. Dividend Decisions

• Basics of Dividends

• Forms of dividend

• Determinants of dividend

• Relevancy and Irrelevancy of Dividend Policies- Traditional Approach, Walter’s model, Gordon’s model, Modigliani and Miller (MM) Hypothesis

4. Management of Working Capital

1. Management of Working Capital

• The management of working capital- Liquidity and Profitability

• The Working capital financing decisions- Primary and Secondary Sources of Liquidity

• The working Capital Cycle (operating Cycle), Effectiveness of Working Capital based on its operating and cash conversion cycles

• Assessment of working capital requirement

• Management of Accounts Receivables (Debtors)

• Factoring and Forfaiting

• Management of Accounts Payables (Creditors)

• Management of Inventory

• Management of Cash, Treasury management

• Banking norms of working capital finance

Section B- Economics for Finance

1. Determination of National Income

• Macro-Economic Aggregates and Measurement of National Income

• The Keynesian Theory of Determination of National Income

2. The Money Market

• The Concept of Money Demand: Important Theories of Demand for Money

• The Concept of Money Supply

• Monetary Policy

3. Public Finance

• Fiscal functions: An Overview.

• Market Failure

• Government Interventions to Correct Market Failure

• Fiscal Policy

4. International Trade

• Theories of International Trade

• Trade Policy – The Instruments of Trade Policy

• Trade Negotiation

• Exchange Rates and its economic effects

• International Capital Movements: Foreign Direct Investment