Course Outline: PRINCIPLES OF FINANCE-FINN 100 Samia S. Khokhar

2 Aims & Objectives The course aims to provide a pedagogical introduction to the area of Managerial Finance The level of difficulty of the course material is elementary to medium The course will provide theoretical knowledge, while consistently linking the theoretical issues to the “real-world” (i.e. practical) cases The objective of the course is to enable students to develop clear understanding of the (corporate) financial issues The project will require the application of the knowledge gained throughout the course. A report as well as a presentation will be required

3 Course Information Instructor: Samia S. Khokhar Recommended course prior to “Principles of Finance”: Financial Accounting-I Sessions: 28 sessions of 75 minutes each Class Timings: Tuesdays and Thursdays, 10 am to 11:15 am Office Hours: Tuesdays and Thursdays, 11:30 am to 12:30 pm

4 Course Information The course is divided into three modules Introduction to Managerial Finance Valuation Investing and Financing Grading Attendance & Class Contribution 10% Quizzes (Total 5 out of which best 4 will be counted) 15% Mid-term Examination 25% Final Examination 25% Project (Details will be provided in session 4) 20%

5 Reading Material Textbook Lawrence J. Gitman, Principles of Managerial Finance, Twelfth Edition, Prentice Hall. (LG) Reference Books Block, S. B. and G. A. Hirt, Foundations of Financial Management, Tenth Edition, McGraw-Hill Irwin. (B&H) Brealey R.A. and S. C. Myers, Principles of Corporate Finance, Sixth Edition, McGraw-Hill Irwin. (B&M) Financial Newspapers Business Recorder Financial Times (FT.com) The Wall Street Journal (WSJ.com) Further Supplementary Material Book chapters, newspaper / journal / magazine articles, etc. may be assigned as additional readings during the period of the course

6 Sessions 1 – 6 Sessions 1 & 2: The Role and Environment of Managerial Finance Reading: LG, Chapter 1 Introduction to the course What is finance and why study managerial finance? Organization of the finance function and relationship to economics and accounting The goals of the firm i.e. maximizing profits or shareholder wealth. The issue of corporate governance and the role of business ethics Financial institutions and markets and the relationship between them. The money and capital markets Sessions 3 & 4: Financial Statements and Analysis Reading: LG, Chapter 2 Details of the project The key financial statements and the notes to the statements Financial ratios- Liquidity, Activity, Debt, profitability and market ratios A complete ratio analysis Sessions 5 & 6: Cash Flow and Financial Planning Reading: LG, Chapter 3 Developing the statement of cash flows Short and long-term financial plans Preparing the cash budget Preparing the pro forma income statement and balance sheet

7 Sessions 7 – 14 Sessions 7-9: Time Value of Money Reading: LG, Chapter 4 Future value and present value of single amounts, annuities and mixed streams Semi-annual, quarterly and continuous compounding Special applications of time value Sessions 10 & 11: Risk and Return Reading: LG, Chapter 5 Definition of risk and return Assessment and measurement of risk associated with single assets and portfolios Capital Asset Pricing Model (CAPM) Sessions 12-14: Interest Rates and Bond Valuation Reading: LG, Chapter 6 Fundamentals of interest rates Term structure of interest rates and risk premiums General features of bonds Bond yields, prices, and ratings Bond valuation Duration

8 Sessions 15 – 22 Session 15: Mid-term Examination Sessions 16-18: Stock Valuation Reading: LG, Chapter 7 Difference between debt and equity capital Common and preferred stock Common stock valuation Issuing new stock Session 19: Capital Budgeting Cash Flows Reading: LG, Chapter 8 Capital Budgeting decision process Initial investment and operating cash flows Sessions 20-22: Capital Budgeting Techniques Reading: LG, Chapter 9 Overview of various techniques Payback Period Net Present Value (NPV) Internal Rate of Return (IRR) Comparison of NPV and IRR

9 Sessions 23 – 28 Sessions 23 & 24: Cost of Capital Reading: LG, Chapter 11 Overview of the cost of capital Cost of long-term debt, preferred stock, and common stock Weighted Average Cost of Capital (WACC) Session 25: Talk by a Guest Speaker Sessions 26-28: Project Presentations