Wednesday, March 2, 2016


FIN 201: Business Finance (Credit Hours: 3)
BBA, Second Year, Third Semester 
Course Objective:
The basic objective of this course is to impart basic knowledge and required skills of business finance to
students to understand the nature and functions of finance and to professionally use the knowledge to
analyze financial issues and take appropriate financial decisions and actions thereto.
Course Description:
The course deals with nature of finance functions, financial statement and cash flow analysis, time value
of money, risk and return, bond and stock valuation, capital budgeting analysis, and working capital
Course Details:
Unit 1: Introduction: CH 3
Nature of business finance and role of a financial manager; Goals of the firm; Finance functions;
The agency problem; Financial markets and the firm.
Unit 2: Financial Statements, Taxes, Cash Flow and Analysis: CH5
Nature of financial statements; The balance sheet; The income statement; Cash flow; Common
size statements; Ratio analysis; The Du Pont identity; Using financial statement information
Unit 3: The Time Value of Money: CH 6
Concept of the time value of money; Future value and compounding – single and multiple
periods; Present value and discounting – single and multiple periods; Present value vs. future
value – multiple cash flows; Finding number of periods; Loan amortization
Unit 4: Risk and Return: CH 7
Nature of risk and return; Expected returns and variances; portfolio analysis; Risk – systematic
and unsystematic; Diversification and portfolio risk; Systematic risk and beta; The security
market line; The SML and the cost of capital.
Unit 5: Bond Valuation and Interest Rates: CH 5
Bonds and bonds valuation; Bond ratings; Types of bonds; Bond markets; Inflation and interest
rates; Determinants of bond yields.
Unit 6: Stock Valuation: CH 7
Features of common and preferred stocks; Common stock valuation – zero growth, constant
growth, nonconstant growth and two stage growth; The stock markets – dealers and brokers,
organization of stock exchange
Unit 7: Capital Budgeting Analysis: CH 8
Nature of capital expenditures; Significance of capital budgeting; Techniques of capital budgeting
and decision rule – payback rule, average accounting return, internal rate of return and
profitability analysis; Estimates of project cash flows; Role of depreciation; Evaluating NPV
estimates; Replacement problems.
Unit 8:Working Capital Management: CH 7
Nature and objectives of working capital management; Cash management – objectives of cash
management and cash budget; Receivables management – credit policy, credit period, cash
discount and analyzing credit policy; Inventory management – nature of inventory, objectives of
inventory management, economic order quantity and quantity discounts.
Basic Textbook:
Stephen A. Ross, Randolph W. Westerfield and Bradford D. Jordan. Fundamentals of Corporate
Finance. New Delhi: Tata McGraw Hill Education Pvt. Ltd.
Reference Books:
James C. Van Horne and John M. Wachowicz, Jr. Fundamentals of Financial Management. New Delhi:
Prentice-Hall Limited.
Eugene F. Brigham and Joel F. Houston. Fundamentals of Financial Management. Singapore:
Thomson, South-Western.


FIN 101.3 (Credit hours 3)
Finance I
BBA, Second Year, Fourth Semester
Course Objectives:
The two core courses on Finance, Finance I and Finance II, aim to provide students with basic understanding of important concepts in finance and investments. For students choosing to specialize in finance, the two core courses give them solid foundation. For students choosing to concentrate on other areas of management, the two core course equips them adequately to understand financial decisions and communicate effectively with finance managers or finance professionals.
Course Contents:
1. Earnings and Cash Flow Analysis 3 hours
Inadequacy of accounting numbers; Emphasis on Free Cash Flow; Interpretation of Financial Ratios.
2. Liquidity and Working Capital Management 3 hours
Working capital and its components; Cash conversion cycle; Managing cash, inventories, and receivables.
3. Concepts of Return and Time value of Money 9 hours
Compound interest, compounding frequency and their implication on future values of an investment; Periodic interest rate and effective annual interest rate; Discounting and present values of cash flows; Valuation of level and growth perpetuities, annuities; Nominal return, inflation, and real return; Nominal and real interest rate/ discount rate.
4. Introduction to Concept of Risk 9 hours
Concept of Expected Value, Variance, Standard Deviation, and Covariance of Returns; Limitation of Variance as a measure of risk; Normal distribution and adequacy of expected return and variance. Concept of diversification; Use and limitations of diversification in risk reduction; Market versus unique risk; Assets versus portfolio risk. Capital Asset Pricing Model (CAPM) and beta as a measure of asset risk.
5. Valuation of Default Risk Free Bond 6 hours
Price and yield relationship of a bond; Price risk of a default risk free bond; Coupon rate and price risk; maturity and price risk.
6. Valuation of Common Stock 6 hours
Book value, Liquidation value, Replacement Cost Value, Dividend Discount Model of stock valuation. Growth stocks and income stocks; Earning per share and P/E multiple; growth, reinvestment, ROE and stock Price; Market Efficiency and Stock Price Behavior
7. Capital Investment Decisions 6 hours
Superiority of Net Present Value (NPV) over pay back period, accounting rate of return, internal rate of return (IRR), discounted payback period, and profitability index. Estimating cash flows: sunk cost, opportunity cost, cannibalization, sales creation and the concept of incremental cash flows. Capital Replacement Decision; Optimal Timing of Investment; Comparing investment with different lives; Capital Rationing Problem. Sensitivity and Scenario analysis;
8. Capital Structure and Theories of Capital Structure 6 hours
Modigliani and Miller's (MM) irrelevance proposition of Capital Structure; Static Tradeoff Theory of Capital Structure; Pecking Order Theory; Impact of debt on incentive and agency problems. Cost of Capital and Weighted Average Cost of Capital
Text Book:
1. Brealey, R.A., Myers S.C., Marcus A.J.: Fundamentals of Corporate Finance, McGraw- Hill International edition.
Reference Books:
1. Brigham, E.F., Gapenski, L. C., and Ehourhardt: Financial Management: Theory and Practice, Harcourt College Publication, 9th edition.
2. Van Horne, J.C., and Wachowicz, JR.: Fundamentals of Financial Management, Prentice- Hall India Ltd.