B320/C153 Business Finance
This document addresses the content related abilities, with reference to the module. Abilities of
thinking, learning, problem solving, team work, communication, debating and defending are
addressed by the system wide curricular practices at the institute.
Module Synopsis
Business finance deals with financial decisions that corporations make and the tools & analysis
used to make these decisions. The primary goal being to enhance the value of the corporate
whilst managing the risks involved.
This module equips the students with a basic understanding of the financial aspects of a
corporation. This knowledge will further enhance the student’s conceptual and analytical skills
necessary to make sound financial decisions for a corporate. It is useful for both financial and
non-financial executives.
Topics covered include financial statement analysis, short term & long term financing, managing
working capital, time value of money, capital budgeting, cost of capital, valuation of bonds &
equity, risk and return, leverage & capital structure, options and dividend policy.
Strictly Confidential. For Articulation Purpose Only.
Module Learning Outcomes
Throughout the course, students will learn:
Introduction to Finance
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Explain the goals of financial management.
Describe the role of financial manager in a corporation.
Diagnose the agency problem between shareholders and management.
Financial Statement Analysis
 Explain the statement of financial position and statement of comprehensive income
items and the need for financial statement analysis.
 Explain the various categories of financial ratios and summarize their purposes.
 Compute the four major categories of financial ratios to compare and evaluate financial
statements of companies.
 Interpret the financial ratios.
 Explain the limitations to ratio analysis.
Short-term Financing
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Relate the link between short term and long term financing and alternative asset
financing policies.
Apply the concepts of cash budgeting.
Describe and differentiate the various forms of short term sources of finance.
Describe and explain the factors that will influence the choice of short term finance.
Working Capital Management
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Interpret the composition of an entity’s net working capital.
Compute the cash conversion cycle.
Explain accounts receivable and credit policy.
Describe and apply factoring and assignment of receivables as forms of financing.
Devise strategies to manage net working capital through managing short term liabilities/
payables/ bank overdrafts.
Explain sales forecasting using the percentage of sales approach.
Relate sales forecasting to inventory management.
Describe and examine how to ascertain optimal stock quantity using economic order
quantity.
Explain the importance of cash management and investing idle cash.
Describe and examine how to ascertain optimal cash balance using Miller-Orr model.
Strictly Confidential. For Articulation Purpose Only.
Time Value of money
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Explain Time value of money (TVM) concept.
Differentiate between the concepts of discounting and compounding.
Compute present / future value of multiple cash flows and annuities.
Apply TVM concept to financial decision-making and investment decisions.
Capital Budgeting
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Explain Net Present Value (NPV).
Apply various investment appraisal methods (NPV / IRR / Payback Period / Profitability
Index) to evaluate investment projects.
Differentiate evaluating mutually exclusive and independent investment projects.
Describe the practical problems and limitations in using the various investment appraisal
methods.
Explain how to manage uncertainty in project analysis.
Valuation of Bonds and Equity
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Explain the key features and terms associated with bonds.
Relate the purpose of bonds to the investor.
Explain how valuation of bonds is done.
Describe the factors affecting the value of bonds.
Describe the theoretical and practical considerations of issuing new shares.
Compare debt financing and equity financing.
Use Dividend Discount Model to value an entity’s shares.
Explain the required rate of return on an entity’s shares.
Illustrate the use of PE ratio for valuing equity.
Risk and Return
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Describe investment risk measurement.
Differentiate types of investment risks.
Examine the relationship between risk and return / risk and time.
Compute risk and return for a portfolio of assets / investments.
Illustrate the effects of diversification on the risk and return of assets.
Describe market risk.
Examine the relationship between market risk and return for a portfolio of assets.
Explain the security market line.
Use capital asset pricing model (CAPM) to compute the required rate of return for an
asset.
Evaluate the use and limitations of CAPM.
Strictly Confidential. For Articulation Purpose Only.
Capital Structure
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Explain weighted average cost of capital (WACC).
Examine the relationship between capital structure and WACC.
Compute WACC and relate how required rates of return for different sources of financing
will affect the company’s choice of capital.
Explain the limitations of WACC.
Relate the relationship between debt and the value of an entity.
Contrast the theoretical and practical considerations of leverage on the value of a firm.
Examine the advantages and disadvantages of leverage.
Options
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Describe the basic features of options.
Use diagrams to illustrate option payoffs.
Illustrate the use of options for speculation and hedging.
Explain the determinants of option premiums.
Dividend Policy
 Describe dividend payment process.
 Differentiate types of dividend policy.
 Relate Long Term financial planning with dividend policy.
 Critique the relationship between dividend policy and value of a firm.
Strictly Confidential. For Articulation Purpose Only.
Module Syllabus
School/Centre
Academic Year
Module Name
:
:
:
Centre for Innovation and Enterprise
AY 2010/2011 Semester 2
B320/C153 Business Finance
Learning Objectives:
1.
2.
3.
4.
Explain basic financial concepts and principles.
Identify and explain the main financing sources available to a firm.
Analyze various financial data and incorporate the information to business decisions.
Describe the financial decision making process and discuss the issues faced by business
corporations.
5. Explain the basis of how investment decisions are made and evaluate investment
opportunities.
Module Coverage
Allocated time per day
(One day-One problem PBL pedagogy)
Discussion
in Study
Cluster
4
Resource
gathering and
team work
2
Financial Statement Analysis
4
2
Short term financing
4
2
Managing Working Capital
8
4
Time Value of Money
4
2
Capital Budgeting
4
2
Valuing Bonds
4
2
Valuing Equity
4
2
Risk and Return
8
4
Capital Structure
8
4
Options
4
2
Dividend Policy
4
2
Total = 15 problems = 90 hours
60
30
Introduction to Finance
Strictly Confidential. For Articulation Purpose Only.
Formal Lab
Experiment