Course   : Financial Strategizing: A Corporate, Risk, & Personal Perspective

Course Code : BMKT 41213

Credit Value : 3

Status : Compulsory

Level : Level 4

Semester : Semester I


Overall Learning Outcomes : At the end of the session students should be able to;

  1. appraise suitable financial objectives for different types of organizations
  2. assess different long term capital options
  3. ascertain the cost of capital amounts of different options and if combined options are used the overall Weighted Average Cost of Capital (WACC)
  4. evaluate optimal capital structure decision making
  5. appraise different dividend and share price movement in making portfolio investment decisions
  6. evaluate investment decision making and growth strategies
  7. propose risk mitigating options
  8. plan personal financing and investment
  9. asses financial independence towards future success

Course Content         :

Topic No

Topic

Learning Outcomes

Teaching

and

Learning Method

Method of Assessment

01. Corporate Financial Management

1.1

Corporate Financial Objectives Setting

At the end of the session students should be able to;

1.      discuss appropriate strategic financial objectives for different types of organizations (including; profit maximization/ wealth maximization/ value for money/ balance scorecard)

2.      assess the functions of financial management (Financing/Investment/Dividends) including their interconnections, and also their likely impact on different stakeholder interests

3.      evaluate the measurement options of designated strategic financial objectives


Lectures

End Semester Examination

1.2

Financing

and Dividend Functions

At the end of the session students should be able to;

  1. examine the appropriateness of different working capital strategies (moderate, aggressive, and conservative)
  2. examine different types of capital markets (Stock market, bond market and money market), advantages and disadvantages of stock market listing, and main stakeholders in the capital market and their functions (including, Colombo Stock Exchange, Securities and Exchange Commission, issuing house, brokers, primary dealers, money brokers, Central Depositary System, underwriters)
  3. ascertain the cost of equity using Dividend Valuation Methods (DVM/DGM) and Capital Asset Pricing Model (CAPM)
  4. assess systematic (market wide/ non-diversifiable) and unsystematic risk (firm specific/ diversifiable), and their implications to equity financing from a company’s viewpoint (beta factor and expected return) and an investor’s view point (basic fundamentals of a diversified portfolio)
  5. distinguish different dividend policies and theories (including; liquidity preference theory, residual policy, and dividend irrelevancy theory) taking into account factors such as cliental effect, leverage and capital requirements, solvency tests, tax compliances, and etc.)
  6. distinguish share price movement theories such as fundamental, technical or charting, random work theories, & Efficient Market Hypothesis (EMH), and their relevancy to capital markets investment decision making
  7. examine debt financing methods available (including; bank loans, bonds, debentures, securitizations, commercial papers, debt sweeteners(convertibles & warrants), senior vs. junior debt, international bonds, and etc…)
  8. determine the cost of debt of undated bond/ irredeemable debt (interest yield), and the value of dated bond/ redeemable debt(yield to maturity)
  9. discuss different types of lease options & their different tax implication, and Assess ‘purchase or lease decision’ using NPV calculations

10.  evaluate alternative capital structure theories (Traditional theory, Modigliani and Miller theories without and with tax)

11.  calculate the weighted average cost of capital (WACC)

12.  outline difficulties in using current WACC for new project appraisal, when business and financial risk are different, and possible options in identifying an appropriate project specific cost of capital rate in evaluating a different project


Lectures

Scenario based discussions

End Semester Examination

1.3

Investment  Function

At the end of the session students should be able to;

  1. appraise financial [Discounted Cash Flow (DCF) and Non-DCF method answers] and non-financial factors in undertaking a project
  2. diagnose (Only through narratives) the impact on project appraisal under:

-          Foreign investments (using forward exchange rates and/or country specific DCF

-          Side effects of financing (including; tax benefits, subsidized loans, government grants) using Adjusted Present Value (APV)assess the importance of Post Completion

  1. construct a Post Completion Audit (PCA) under project monitoring & review, and the validity in recognizing real options


Lectures

End Semester Examination

1.4

Corporate Growth  Strategy

At the end of the session students should be able to;

  1. discuss mergers, acquisitions, and divestment (including; trade sale, spinoff, and management-buy-outs/MBOs) as a business strategy (including reasons, critical success factors, and likely constraints)
  2. diagnose business valuation techniques (including tangible & intangible asset based, earnings based, proxy PE based, and cash flow based) for a specific merger or acquisition or divestment
  3. recommend appropriate business value and terms taking into account financial and strategic implications for a specific merger or acquisition or divestment


Lectures

Scenario based discussions

End Semester Examination

02. Corporate Risk Management

2.1

Risk identification and management

At the end of the session students should be able to;

  1. diagnose various types of risks such as credit risk, interest rate risk, liquidity risk, foreign exchange risk, price risk, operational risk and reputational risk
  2. assess factors contributing towards each of these risks
  3. discuss different tools or strategies to mitigate (hedging options) each of the risks identified above


Lectures

End Semester Examination

03. Personal Financial & Risk Management

3.1

Introduction to personal financial planning

At the end of the session students should be able to;

  1. assess personal financial literacy
  2. distinguish assets from liabilities when making investments
  3. create financial independence

Role playing through reflective book reviewing of “Rich Dad Poor Dad”

Individual assignment on personal financial planning

End Semester Examination

3.2

Personal risk management: Insurance planning

At the end of the session students should be able to;

  1. discuss different insurance policies available
  2. evaluate and propose the best insurance policy (General or Life)

Role playing with insurance representative presenting different policy options

Individual assignment on Insurance planning.

End Semester Examination

3.3

Employee benefits and retirement planning

At the end of the session students should be able to;

  1. outline employee benefits (including; allowances, gratuity, ETF, EPF)
  2. formulate an optimal plan to extract best employment benefits now and at retirement

Guest Presentation

Individual assignment on employee benefit & retirement planning

End Semester Examination

3.4

Personal tax filing

At the end of the session students should be able to;

  1. outline the statutory requirements of income tax filing
  2. assess all avenues available in extracting the optimum tax filing

Discussions by reviewing Inland Revenue income tax filling schedule

Individual assignment on personal tax filling

End Semester Examination

Recommended Reading      :

  1. Brealey, B., Myers, S. and Marcus, A. (2011), “Principles of Corporate Finance”, 7th Edition, McGraw Hill/Irwin.
  2. Horne, J. V. and Wachowicz, J.M. (2008), “Fundamentals of Financial Management”, 13th edition, Prentice Hall.
  3. Kiyosaki, R. T. (2011), “Rich Dad Poor Dad”, Plata Publishing.
  4. Pandaey, I. M. (2011), “Financial Management”, 3rd Edition, Vikas Publishing.
 

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