CA Final AFM Chapter Weightage

PAPER – 2: ADVANCED FINANCIAL
MANAGEMENT (100 Marks)
Objective
To acquire the ability to apply financial management theories and
techniques in strategic decision making.
Contents Section Weightage
(1) Financial Policy and Corporate
Strategy
(i) Advanced role of CFO in various
matters including Value Creation
(ii) Strategic decision making
framework
(ii) Interface of Financial Policy and
strategic management
(iii) Balancing financial goals vis-à-vis
sustainable growth.
(2) Risk Management
(i) Identification of types of Risk
faced by an organisation
(ii) Evaluation of Financial Risks I 8% – 15%
(iii) Value at Risk (VAR)
(iv) Evaluation of appropriate method
for the identification and
management of financial risk.
(3) Advanced Capital Budgeting
Decisions
(i) Current trends in Capital
Budgeting
♦ Impact of Inflation on Capital
Budgeting Decisions.
♦ Impact of change in
technology on Capital
Budgeting
♦ Impact of change in
Government Policies on
Capital Budgeting
(ii) Dealing with Risk in Investment
Decisions
(iii) Internal and External Factors
affecting capital budgeting
decision
(iv) Methods of incorporating risk in
Capital Budgeting
(iv) Adjusted Present Value
(v) Optimum Replacement Cycle
(4) Security Analysis
(i) Fundamental Analysis
(ii) Technical Analysis
- Meaning
- Assumptions
- Theories and Principles
- Charting Techniques - Basics
- Efficient Market Hypothesis
(EMH) Analysis
(iii) Equity Research and tools
available
(5) Security Valuation II 20% – 30%
(i) Theory of Valuation
(ii) Return Concepts
(iii) Equity Risk Premium
(iv) Required Return on Equity
(v) Discount Rate Selection in Relation
to Cash Flows
(vi) Approaches to Valuation of Equity
Shares
(vii) Valuation of Preference Shares
(viii) Valuation of Debentures/ Bonds
(ix) Role and Responsibilities of
Valuers
(x) Precautions need to be taken by a
Valuer before accepting any
valuation assignment.
(6) Portfolio Management
(i) Portfolio Analysis
(ii) Portfolio Selection
(iii) Capital Market Theory
(iv) Portfolio Revision
(v) Portfolio Evaluation
(vi) Asset Allocation
(vii) Fixed Income Portfolio
(viii) Risk Analysis of Investment in
Distressed Securities
(ix) Alternative Investment Avenues
- Real Estate
- Gold
- Private Equity
- REITs
- Hedge Funds
- ETFs
- Mutual Funds
- Commodities
(7) Securitization
(i) Introduction
(ii) Concept and Definition
(iii) Benefits of Securitization
(iv) Participants in Securitization 20% – 30%
(v) Mechanism of Securitization
(vi) Problems in Securitization
(vii) Securitization Instruments
(viii) Pricing of Securitization
Instruments
(ix) Risks in Securitization
(x) Tokenization
(xi) Securitization in India
(8) Mutual Funds
(i) Meaning
(ii) Types
(iii) Advantages and Disadvantages of
Mutual Funds
(iv) Evaluation of Mutual Funds
(v) Role of Fund Manager in Mutual
Funds
(vi) Hedge Funds
(vii) Role of FIIs in Mutual Funds
(9) Derivatives Analysis and Valuation
(i) Introduction to Forwards, Futures
and Options
(ii) Futures Market
(iii) Pricing of Forwards and Futures
(iv) Hedging using Futures
(v) Options
- Option Pricing
- Option Greeks
- Exotic Options
(vi) Credit Derivatives
(vii) Real Options
(viii) Derivative Mishaps and Lessons
(ix) Swaps
(x) Commodity Derivatives
(xi) Weather Derivatives
(xii) Electricity Derivatives
(10) Foreign Exchange Exposure and Risk
Management
(i) Factors affecting foreign exchange
rate
(ii) Role of SWIFT in Foreign
Exchange
(iii) National and International
Payment Gateways
(v) Exchange rate determination
(vi) Foreign currency market
(vii) Management of Foreign Exchange
Risk
(11) International Financial Management
(i) International Capital Budgeting
- Offshore Investment Strategies
vis-à-vis Domestic Capital
Budgeting
- Project vis-à-vis Parent Cash
IV 20% – 25%
Flows
- Discounting Rate and Adjusting
Cash Flows
- Adjusted Present Value
(ii) Raising funds from International
Sources
(iii) Sovereign Funds
(iv) International Financial Centre
(GIFT City)
(v) International Working Capital
Management
a) Multinational Cash
Management
• Objectives of Effective
Cash Management
• Optimization of Cash
Flows/ Needs
b) Multinational Receivable
Management
c) Multinational Inventory
Management
(12) Interest Rate Risk Management
(i) Benchmark Rates
(ii) Interest Rate Risk
(iii) Hedging Interest Rate Risk
- Traditional Methods
• Asset and Liability
Management (ALM)
• Forward Rate
Agreement (FRA)
- Modern Methods including
Interest Rate Derivatives
• Interest Rate Futures
• Interest Rate Options
• Swaps
• Swaptions
(13) Business Valuation

(i) Conceptual Framework of
Valuation
(ii) Approaches/ Methods of Valuation
- Assets Based Valuation
Model
- Earning Based Models
- Cash Flow Based Models V 10% – 15%
- Measuring Cost of Equity
• Capital Asset Pricing
Model (CAPM)
• Arbitrage Pricing
Theory
• Estimating Beta of an
unlisted company
- Relative Valuation
• Steps involved in
Relative Valuation
• Equity Valuation
Multiples
• Enterprise Valuation
Multiple
- Other Approaches to Value
Measurement
• Economic Value
Added (EVA)
• Market Value Added
(MVA)
• Shareholder Value
Analysis (SVA)
- Arriving at Fair Value
(iii) Going concern and Non Going
concern valuation
(iv) Valuation of Distressed Companies
(v) Valuation of Start ups
(vi) Valuation of Digital Platforms
(vii) Valuation of Professional/
Consultancy Firms
(viii) Impact of ESG on valuation
(14) Mergers, Acquisitions and Corporate
Restructuring
(i) Conceptual Framework
(ii) Rationale
(iii) Forms
(iv) Mergers and Acquisitions
- Financial Framework
- Takeover Defensive Tactics
- Reverse Merger
(v) Divestitures
- Partial Sell off
- Demerger
- Equity Carve outs
(vi) Ownership Restructuring
- Going Private
- Management/ Leveraged
Buyouts
(vii) Unlocking the value through
Mergers & Acquisitions and
Business Restructuring
(viii) Cross Border Mergers
(ix) Special Purpose Acquisition
Companies (SPACs)
(15) Startup Finance
(i) Introduction including Pitch
Presentation
(ii) Concept of Unicorn VI 2% – 5%
(iii) Startup Initiative of GOI
(iv) Sources of Funding
(v) Succession planning in Business

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PAPER – 2: ADVANCED FINANCIAL

MANAGEMENT (100 Marks)

(13) Business Valuation

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