Indian Institute of Management

Lucknow

INDIANINSTITUTEOFMANAGEMENT,LUCKNOW
POSTGRADUATEPROGRAM
FINANCIALMANAGEMENT
FN1303
TERMIII,201415

InstructorandContactInformation
Faculty
Prof.MadhusudanKarmakar
Numberofsections
2
RoomNo
113
Telephone
6624
MailID
madhu@iiml.ac.in

Faculty
Prof.VivekRajvanshi
Numberofsections
2
RoomNo
213
Telephone
6615
Email
vivekr@iiml.ac.in

Prof.AjayKGarg
2
128
6609
ajaygarg@iiml.ac.in

Prof.VikasSrivastava
1
231
6665
vikas.srivastava@iiml.ac.in

COURSEDESCRIPTION
FinancialManagementisanintroductorycourseinFinanceThiscoursefocusesonthevalueofthefirm
andalsothefactorsthatinfluencethisvalue,likevariousrisksthefirmfaceswhileselectinganewproject,
changesinlevelofdebtofthefirmtomentionafew.Italsogivesanintroductoryviewofworkingcapital
management. Derivatives and lease financings methods are also discussed to give a fair view of
instrumentsusedbyinvestorsandfirmstomaximizevalue.
Thiscourseistaughtusingexercisesandcases.Itisimportantthatthestudentreadstheintendedreading
material before coming to the class thoroughly. We repeat, students have to read the relevant reading
material before attending the class! The students are expected to participate in all of the class room
discussions.
COURSEOBJECTIVE
Everydecisionthatafirmmakeshasafinancialmanagementcomponenttoitandthecourseattempts
tostresstheneedforadequacy,appropriatenessandresponsivenessofsuchdecisions.ThePurposeof
thecourseisto:

Providestudentswithcomprehensiveknowledgeofcorefinancetheoriesandmodels.
Provideastrongtheoreticalandanalyticalbasethatisgroundedinrealworldapplicationusing
cases and exercises. Among the topics covered in the course are: Investment Decisions,
Financing Decisions, Dividend Decisions, Risk and Return, Working Capital Management,
Lease/HirePurchaseandFinancialDerivatives.
Developanalyticalandcriticalthinkingskillsofstudentsinfinancialdecisionmakingandmake
useofspreadsheetsinfinancialmodeling.
1

2
RecognizeandresolvesocialandethicalissuesandagencycostsinStrategicfinancialdecision
making.
Enhancecommunicationskillsthroughcaseanalysis,writtenreportsandpresentations.

COURSELEARNINGOUTCOMES
Bytheendofthecoursethestudentshouldbeableto:
1) Understand and analyse the relationship between strategic decision making and corporate
financingdecisions.
2) Explainhowtovaluecapitalinvestmentsandusethekeycapitalbudgetingtechniques.
3) Understand the mathematics of risk and return and how risk affects the value of the asset in
equilibriumandalsoexplainthecharacteristicsofderivativeassets.
4) Learn to compute the cost of capital and discuss the theoretical framework of informational
efficiency in financial markets and understand the tradeoff firms face while choosing capital
structure.
5) Understandandexplaintherelevance,factsandroleofthedividendpolicy.
6) ShouldbeabletocalculateWorkingCapitalrequirementsandUnderstandhowfinancialdecisions
cancontributetofirmvalue
7) Understandfinancialmodellingandrealworldapplicationofcoreconceptsoffinance.
8)Understandstrategicfinancialdecisionmakinginaglobalcontext.
ALIGNMENTSOFINTENDEDPROGRAM&COURSELEARNINGOUTCOMES

Sn. ProgramObjectives
1
2

Toacquireknowledgeandskillsinkeyfunctionalareas

CourseLearning(CL)outcomes
(seesectionabove)
CL26

Tointegrateandapplybusinessknowledge

CL6,7,8;Assignments
CL1,6,7,8;Cases111

Todevelopaglobalperspective

CL8;CaseStudies

Toinculcatevaluesofprofessionalism,ethicalleadershipand
socialresponsiveness

CL1,6

Tomasterrelationalandinterpersonalcommunicationskills

CasereportsandPresentations

Tointernalizetheknowledgeandskillsinkeyfunctionalareas

REQUIREDCOURSEMATERIALSANDREADINGS
BasicText(BT)

RichardA.BrealeyandStewartC.Meyers,FranklinAllenandPitabasMohanty,PrinciplesofCorporate
Finance,TataMcGrawHill.LatestEdition(BM)

Pandey,I.M,FinancialManagement,VikasPublishingHousePvtLtd,LatestEdition

Kester,RubackandTufana,CaseProblemsinFinance,,12thEd,TataMcGrawHill

Referencebooks

LawrenceJGitman,PrinciplesofManagerialFinance,PearsonEducation..
Benninga,Simon,PrinciplesofFinancewithExcel,Oxford,OxfordUniversityPress.
Damodaran,AswathCorporateFinance:Theory&Practice,JohnWiley
Ross,S.A.,RWWesterfield,J.Jaffe&RKKakani.CorporateFinance,TataMcGrawHill.

EVALUATION

Exams:Therewillbetwoexaminations.
Quizzes:Tobeannouncedbythefaculty.
Group Assignments/ Project Report: Each student will be assigned to a group. More
details of this group project report will be posted on and will also be discussed in
class.

Class Participation: Students are responsible for all materials covered and readings
assigned. Be prepared to answer certain questions that had been emphasized in prior
classesorfromthereadingassignments.
GRADINGSCHEME
MidTermExam
EndTermExam
Quizzes/Assignments/
GroupProject/CP
Total

30
30
40
100

ACADEMICDISHONESTY
Academicdishonestyormisconductischeatingthatrelatestoanacademicactivity.Itisaviolationof
trustbetweentheInstituteanditsstakeholders.Plagiarism,fabrication,deception,cheatingandsabotage
areexamplesofunacceptableacademicconduct.PleaseconsultthePGPManualforthesectionon
academicdishonesty

COURSESCHEDULE
Sessions Details
1

23

47

910

1112

1314

15

Case

FinancialManagement:Functionsand
Objectives
Read:
Chapter1(BM)
LongtermInvestmentDecisionanalysisNPV,
IRR,Paybackperiod,andProfitabilityIndex:
Concepts
Read:
Chapters5,6&11(BM)
LongtermInvestmentDecisions:Applications
Read:
Chapters5,6&11(BM)

ComplexInvestmentDecisions(Investment
decisionsunderinflationaryconditionsand
adjustmentforinflation)
Read:(Tobeprovided)

CostofCapital:Approaches&WACC
Read:
Chapters4,7&8(BM)

Risk,ReturnandCAPM
Read:
Diversification,CAPMandCostofEquityCapital
(Readingmaterial)
Chapters7&8(BM)

RiskAnalysisinLongterminvestmentdecisions
Read:
RiskAnalysisinCapitalBudgeting(Reading
material)
Chapter9&10(BM)
MarketEfficiencyandFinancingDecisions
Read:
Chapter13(BM)
MIDTERMEXAM

Lecture

TentativeDates(SecC
&FOnly)
3rdJan

Case1:NewHeritage
DollCompany:Capital
Budgeting
(InPolycopy)

5th,6thJan

Case2:LockheedTri
Star
Case3:SuperProject.

Lecture&Exercise

7,11,12,13Jan

18Jan

Case4:NikeInc.(In
polycopy)

19,20Jan

Case5:Mariott
Corporation(Abridged)

21,27

28Jan,10feb
Case6:AirbusA3XX:
DevelopingtheWorlds
LargestCommercialJet
(A)(Inpolycopy)
Lecture

11feb

1620

2123

24

2528

2930

Financingdecisions
a) FinancialandoperatingLeverage
b) Capitalstructuretheories
c) CapitalStructureplanningandpolicies
d) Raisinglongtermfundsfromcapital
marketsandfinancialinstitutions
Read:
Chapters17,18,23&24(BM)
DividendTheoriesandPolicies
Read:
Chapters16(BM)
LeaseFinancingvisvisBorrow&Buy
Read:
Chapter26(BM)
ShorttermfinancingandWorkingcapital
management
Read:
Chapters30&31(BM)
FinancialDerivatives
Read:(Tobeprovided)

Case7:Continental
Carriers.
Case8:American
HomeProducts
Corporation.

Case9:DividendPolicy
atFPLGroup,Inc.

3,4,9Mar

10mar

Case10:DellsWorking 11,16,17,18mar
Capital
Case11:Hampton
MachineTools
Lecture&Exercise
23,24mar

ENDTERMEXAM

5
18,23,24,25feb,2nd
Mar