UNIVERSITI UTARA MALAYSIA
COLLEGE OF BUSINESS
COURSE CODE
COURSE NAME
PREREQUISITE
:
:
:
BWFF 2023
FINANCIAL MANAGEMENT II
WFF 2013 FINANCIAL MANAGEMENT I
1.0 SYNOPSIS
This is the follow-up course of Financial Management I, where the aim is to
enhance students’ understanding of the investment decision-making process and
the long term financing process. It reviews the concept of time value of money as
a preparation so that they can apply the concept in other topics such as securities
valuation, capital budgeting and cost of capital. In addition, leverage and capital
structure, dividend policy and international financial management will also be
discussed.
2.0 OBJECTIVES
Upon completion of the course, students are expected to
2.1
2.2
2.3
understand the foundation of key concepts and theories of financial
management as a whole.
acquire knowledge and skills necessary to solve different types of
problems in finance.
develop investment or financing analysis, planning and forecasting on
business and non-business organization.
3.0 LEARNING OUTCOMES
Upon completion of the course, students will be able to
3.1
3.2
3.3
3.4
3.5
identify the concepts and theories related to financial management.
describe decision making techniques discussed in this course.
apply financial concepts, tools and techniques to solve appropriate
hypothetical and real world problems.
evaluate investment decisions in pursuit of maximizing shareholders’
wealth.
analyze valuation on securities i.e. shares and bonds.
4.0
REFERENCES
Gitman, L.J., (2009).Principles of Managerial Finance (12th ed.). Boston :
Prentice Hall, Inc.
Keown, A. J., Martin, J. D., Petty, J. W., & Scott, D. F., Jr. (2005). Financial
management: Principles and applications (10th ed.). New Jersey: Prentice
Hall, Inc.
Ross, S., Westerfield, R., Jordan, B., Mazlan, R., Abidin, F., Zainudin, N.,
Ismail, F., Zainudin, Z., & Ahmad, N. (2007). Financial management
fundamentals in Malaysia (1st ed.). Kuala Lumpur: McGraw-Hill.
Titman, S., Keown, A. J., Martin, J. D., (2011). Financial
management: Principles and applications (11th ed.). Boston : Prentice
Hall, Inc.2
Financial Management (2011). Kuala Lumpur: Pearson Custom Publishing,
Compiled by Sabariah Nordin, Suryati Zawawi, Rusmawati Ismail, and
Kharul Azhar Ramli.
5.0
COURSE CONTENT
NO.
CONTENT
HOURS
1
1.0
1.1
1.2
1.3
1.4
2
3
TIME VALUE OF MONEY REVIEW
An overview on Financial Management II
The relationship between Financial Management I and Financial
Management II
The objectives of learning Financial Management II
Future value and present value
1.4.1
Single amount
1.4.2
Annuities
1.4.3
Perpetuities
1.4.4
Uneven cash flows
2.0
BASICS OF VALUATION AND BONDS VALUATION
2.1
2.2
2.3
2.4
2.5
2.6
2.7
Types of bonds
Terminology and characteristics of bonds
Definition of value
Determinants of value
Bond valuation
Yield to maturity
Important factors in bond relationships
3.0
STOCK VALUATION
3
Chptr
5 &6
6
Chptr
11
6
3.1
3.2
3.3
3.4
3.5
4.0
Features and types of preferred stock
Valuing preferred stock
Characteristics of common stock
Valuing common stock
3.4.1
Single holding period
3.4.2
Constant growth dividend model
3.4.3
Supernormal growth
Stockholder’s expected rate of return
COST OF CAPITAL
Chptr
12
4
4.1
4.2
4.3
4.4
4.5
5.0
Definition and concepts of costs of capital
Determining Individual costs of capital
4.2.1
Bond
4.2.2
Preferred stocks
4.2.3
Common stocks
Weighted average cost of capital (WACC)
Weighted marginal cost of capital (WMCC)
Making investment decision
Chptr
13
TECHNIQUES IN CAPITAL BUDGETING
5
6
5.1
5.2
5.3
5.4
5.5
5.6
5.7
6
6
6.0
6.1
6.2
6.3
6.4
6.5
6.6
7.0
Introduction to capital budgeting
Payback period
Discounted payback period
Net Present value (NPV)
Profitability index (PI)
Internal rate of return (IRR)
Complications in capital budgeting: Capital rationing and mutually
exclusive projects
5.7.1
Time disparity
5.7.2
Size disparity
5.7.3
Unequal lives
CASH FLOWS IN CAPITAL BUDGETING
Relevant cash flow
Initial outlay
Annual cash flow
Terminal cash flow
Replacement and expansion of project
Decision making in capital budgeting
Chptr
14
6
Chptr
14A &
15
LEVERAGE AND CAPITAL STRUCTURE
7
6
7.1
7.2
7.3
7.4
7.5
Business and financial risk
Break-even analysis
Operating leverage
Financial leverage
Combined leverage
Chptr
16
8
7.6
7.7
Optimal capital structure
EBIT- EPS analysis
8.0
DIVIDEND POLICY
8.1
8.2
8.3
8.4
8.5
8.6
Dividend payment versus profit retention
Does dividend policy affect stock price?
The dividend decision in practice.
Dividend payment procedures.
Stock dividends and stock splits.
Stock repurchases
3
Chptr
17
TOTAL
6.0
42
TEACHING METHOD
Lectures and discussions.
7.0
ASSESSMENT
Coursework
- Mid Sem
20%
- Quiz
10%
- Assignment
15%
- Attd & Participation 5%
Final Examination
50%
50%