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Managerial Finance

Chapter I

Corporate Finance

1.1

What is Finance?

1.2

What is a Corporate?

1.3

Stocks vs. Bonds

1.4

The Financial Manager

1.4.1

Key Points Regarding the goal of the Financial Manager

1.5

Social Responsibility and Ethics

1.6

International Issues

Agency Relationships

Compensation Packages

Self-assessment

Chapter II

Basic Investment Mathematics

2.1

Elementary Statistical Concepts

2.2

Time Value of Money

2.3

Capital Structure

2.4

Planning the Capital Structure

2.5

Corporate Benefits

2.6

Valuation of Equities

2.7

Risk and Return

2.8

Market Indices

2.9

Capital Budgeting

2.9.1

Capital Budgeting

Chapter III

Time Value of Money
3.1	Introduction
3.2	Process of Compounding
3.3	Process of Discounting
3.4	The Distinction Between the Concepts of Compound Interest and Simple Interest
3.5	Future Value of a Lumpsum (Single Flow)
3.6	Doubling Period
3.7	Growth Rate
3.8	Increased Frequency of Compounding
3.9	Effective vs. Nominal Rate of Interest
3.10	Future Value of Multiple Flows
3.11	Future Value of Annuity
3.12	Sinking Factor Fund 40
3.13	Present Value of a Single Flow
3.14	Present Value of Multiple Flows
3.15	Present Value of an Annuity
3.16	Capital Recovery Factor
3.17	Present Value of a Perpetuity
	Self-assessment

Chapter IV

Working Capital Management
4.1	Introduction
4.2	Definition
4.3	Contents of Working Capital
4.4	Characteristics of Current Assets
4.5	Cash Cycle
4.6	Use of Working Capital
4.7	Why is Working Capital Required?
4.8	Working Capital Cycle
4.9	Determinants of Working Capital
4.10	Sources of Working Capital
4.11	Key Working Capital Ratios
	Self-assessment

Chapter V

Financial Statement Analysis

5.1

Introduction

5.1.1

Balance Sheet and Profit and Loss Account

5.2

Comparative Financial Statements

5.3

Common Size Statements

5.4

Ratio Analysis

5.5

Equity Research

5.6

Types of Financial Ratios

5.6.1	Liquidity Ratios
5.6.2	Current Ratio
5.6.3	Quick Ratio
5.6.4	Leverage Ratios
5.6.5	Debt Equity Ratio
5.6.6	Debt Assets Ratio
5.6.7	Interest Coverage Ratio
5.6.8	Turnover Ratios
5.6.9	Average Collection Period
5.6.10	Receivables Turnover Ratio
5.6.11	Fixed Assets Turnover Ratio
5.6.12	Profitability Ratios
5.6.13	Net Income to Total Assets Ratio
5.6.14	Return on Investment
5.6.15	Return on Equity
5.6.16	Price Earnings Ratio
5.6.17	Yield

5.7

Problems of Financial Statement Analysis

Self-assessment

Chapter VI

Stock Valuation

6.1

Introduction to Stocks

6.2

Par Value vs Book Value vs Market Value

6.3

Valuing a Firm’s Stock

6.4

Measuring Cash Flows for an Asset with Equity Risk

6.5

Valuing an Asset with Equity Risk and Finite Life

6.5.1

Dividend - Valuation Model

6.6

Valuing an Equity with an Infinite Life

6.5.1

Constant Growth Dividend Valuation Model

6.7

Valuing Stocks that have a Non-Constant Growth Rate

6.8

A Broader Measure of Cash Flows to Equity

6.9

The P/E Multiple Approach

6.10

The EVA Approach

6.11

Graham and Dodd Model

6.12

Lintener’s Model

6.13

Market Efficiency

6.14

Valuation of Fixed Assets

6.15

Self-constructed Fixed Assets

6.16

Non-monetary Consideration

6.17

Improvements and Repairs

6.18

Valuation of Current Assets and Intangibles

6.18.1	Current Assets
6.18.2	Accounts Receivable
6.18.3	Cash
6.18.4	Inventory

6.19

Investments (Financial) and Marketable Securities

6.19.1	The Accounting Rules Vary Depending Upon the Categorisation
6.19.2	Minority, Active Investments
6.19.3	Majority, Active Investments

6.20

Intangible Assets

6.20.1	Patents and Trademarks
6.20.2	Goodwill

6.21

The Nature of Accounting Returns v. Market Returns

6.21.1	Introduction
6.21.2	Case Assumptions
6.21.3	Performance Formulas
6.21.4	Calculations

Self-assessment

Chapter VII

Valuation of Bonds

7.1

Definition

7.2

Types of Bonds

7.3

Valuation of Bonds

7.4

Interest Rates

7.5

Types of Yield curve

7.6

Explanations of the Term Structure

7.8

Bond Price Volatility

7.8.1	Convexity
7.8.2	Bond Pricing
7.8.3	Present Value

7.9

Accrued Interest and Clean Price

7.10

Discounted Cash flow

7.11

Bond Maturity and Duration

7.12

Bond Immunisation

7.13

A Bond Idea Whose Time Has Come

7.14

Some Apprehensions

Self-assessment

Chapter VIII

Firm Valuation: Cost of Capital and APV Approaches

8.1

Introduction

8.2

The Free Cash Flow to the Firm

8.3

FCFF and Other Cash Flow Measures

8.4

Free Cash Flows to the Firm: Comparison to Other Measures

8.5

Stable Growth Firm

7.8.1	The Caveats
7.8.2	Growth Rate
7.8.3	Limitations

Net Debt Versus Gross Debt

Will Equity Value be the Same Under Firm and Equity Valuation?

Firm Valuation: The APV Approach

APV, Without Bankruptcy Costs

The Effect of Leverage in Firm Value

Default Risk, Operating Income and Optimal Leverage

APV and Financial Leverage

Steps in the Adjusted Present Value Approach

Valuing the Pieces Rather Than the Whole

Self-assessment

Chapter IX

Leasing, Hire Purchase and Venture Capital

9.1

Lease

9.2

Advantages of Lease

9.3

Sources of Funds for Finance Companies

9.4

Contents of the Lease Agreement

9.5

Sale and Lease Back Transactions

9.6

Hire Purchase

9.6.1	Salient Features
9.6.2	Sales Tax Aspects
9.6.3	Accounting Aspects

9.7

Venture Capital

9.7.1	Characteristics of V.C.
9.7.2	Importance of Venture Capitalists
9.7.3	Indian Venture Capital Industry
9.7.4	Expansion Financing
9.7.5	The Venture Investment Process
9.7.6	Investment Valuation
9.7.7	Structuring the Deal
9.7.8	The Entrepreneur Seeks
9.7.9	Common Consideration

Self-assessment

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