Principles of Finance

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Principles of Finance

Course Objective:
This course is designed to introduce the fundamental issues of financial management and some
quantitative techniques used to address them. Topics include fundamentals of finance; financial
statement analysis; time value of money; risk and return; cost of capital, bond and stock
valuation; working capital and current asset management. With this background, students can
understand the specific techniques and decision rules that are used to help maximize the value of
the firm.

Detail Course Plan:

Chapter Chapter Title


1 An Introduction to financial management
Definition, Functions of Financial management, Goal of
a Firm, Agency issues, Business Ethics, Corporate
Governance
2 Financial Statements and Ratio Analysis
Tools of Analysis of Financial Statements. Ratio
Analysis: Liquidity, Activity, Debt, Profitability and
Market Ratios. Using and Interpreting Ratios
3 Time value of Money
Compounding vs. Discounting. Future vs. Present
Values. Perpetuity and Annuities. Mixed Streams of
Cash Flows. Frequent and Continuous Compounding.
Applications of Time Value of Money. Stock and Bond
Valuation.
4 Risk and Return
Concepts of asset's risk and variance of returns,
Expected portfolio returns. Portfolio risk and asset’s
covariances. Types of risk, The feasible set of assets
and the diversification. The efficient frontier of risky
assets. Introducing risk-free asset
5 Cost of Capital
Concepts, cost of equity, cost of debt, cost of preferred
stock, cost of retained earnings, weighted average cost
of capital
6 Interest Rates and Bond Valuation
Interest rate fundamentals, corporate bonds, valuation
fundamentals, bond valuation
7 Stock Valuation
Difference between debt and equity, common and
preferred stock, common stock valuation, decision
making and common stock value
8 Working Capital and Current Asset management
Net Working Capital Fundamentals. Cash conversion
Cycle. Inventory Management. Account Receivables
Management. Management of Receipts and
Disbursements.

Text Book:
1. “Principles of Managerial Finance” – Lawrence J Gitman, 13th Ed.

Reference Books:

1. Fundamentals of Corporate Finance; Stephen A. Ross, Randolph W. Westerfield & Bradford


D. Jordan
2. Fundamentals Financial Management; James C. Van Horne, John M Wachowicz, JR;

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