3.4 FINANCIAL MANAGEMENT
OBJECTIVE
The objective is to enable students to understand the basic concepts of Financial Management and
the role of Financial Management in decision-making.
Unit 1: INTRODUCTION FINANCIAL MANAGEMENT (10 hrs)
Introduction – Meaning of Finance – Business Finance – Finance Function – Aims of Finance
Function – Organization structure of Finance Department – Financial Management – Goals of
Financial Management – Financial Decisions – Role of a Financial Manager – Financial Planning –
Steps in Financial Planning – Principles of Sound Financial Planning – Factors influencing a sound
financial plan.
Unit 2: TIME VALUE OF MONEY (12 hrs)
Introduction – Meaning& Definition – Need – Future Value (Single Flow – Uneven Flow &
Annuity) – Present Value (Single Flow – Uneven Flow & Annuity)– Doubling Period – Concept
of Valuation: Valuation of Bonds, Debentures and shares – Simple Problems.
Unit 3: FINANCING DECISIONS (12 hrs)
Introduction – Meaning of Capital Structure – Factors influencing Capital Structure – Optimum
Capital Structure – Computation & Analysis of EBIT, EBT, EPS – Leverages. Simple Problems
Unit 4: INVESTMENT & DIVIDEND DECISION (16 hrs)
A. Investment Decision: Introduction – Meaning and Definition of Capital Budgeting – Features
– Significance – Process – Techniques: Payback Period, Accounting Rate of Return, Net
Present Value, Internal Rate of Return and profitability index Simple Problems.
B. Dividend Decision: Introduction – Meaning and Definition – Determinants of Dividend
Policy – Types of Dividends– Bonus share (theory only)
Unit 5: WORKING CAPITAL MANAGEMENT (6 hrs)
Introduction – Concept of Working Capital – Significance of Adequate Working Capital – Evils of
Excess or Inadequate Working Capital – Determinants of Working Capital – Sources of Working
Capital.
BUSINESS LAB ACTIVITIES
1. Draw the organization chart of Finance Function of a company
2. Capital structure analysis of companies in different industries
3. Evaluate the NPV of an investment made in any one of the capital projects of a company for
5 years.
4. Develop E-content for working capital management to a service organizations
5. Prepare E-content of dividend policy of a company
BOOKS FOR REFERENCE
1. S N Maheshwari, Financial Management, Sultan Chand
2. Sharma and Sashi Gupta, Financial Management, Kalyani Publication
3. Khan and Jain, Financial Management, TMH
4. Prasanna Chandra, Financial Management, TMH
5. I M Pandey, Financial Management. Vikas Publication
6. G. Sudarshan Reddy, Financial Management, HPH
7. Aswathnaraya and Ghousia Khatoon – Financial management VBH
