Financial, Treasury and Forex Management

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2 Paper Financial, Treasury and Syllabus... Q&A-.2 Bird's-Eye View... Q&A-.5 Line Chart... Q&A-.9 Frequency Table Showing Distribution of Marks... Q&A-.10 Frequency Table Showing Marks of Compulsory Questions... Q&A-.11 Legends for the Graphs... Q&A-. Study Material Based Contents 1. (Study I) Nature and Scope of Financial Management... Q&A (Study II) Capital Budgeting Decisions... Q&A-.29. (Study III) Capital Structure Decision... Q&A-.9. (Study IV)... Q&A (Study V) Dividend Policy... Q&A-.19. (Study VI)... Q&A-.21. (Study VII)... Q&A-.2. (Study VIII) Financial Services... Q&A (Study IX) Project Planning and Control... Q&A (Study X) Derivatives and Commodity Exchanges... Q&A (Study XI) Treasury Management... Q&A-.. (Study XII)... Q&A-.1 Question Paper of December, Q&A-.1 Question Paper of June, Q&A-.1 Question Paper of December, Q&A-.21 Question Paper of June, Q&A-.25 Q&A-.1

3 Paper Syllabus Financial, Treasury and (100 marks) Level of knowledge: Expert knowledge. Objectives: (i) To provide conceptual clarity about the management tools and techniques used in financial planning, analysis, control and decision making. To provide knowledge of derivatives, forex and treasury management to enable the candidates to tackle practical situation with ease. Detailed contents: 1. Nature and Scope of Financial Management Nature, significance, objectives and scope of financial management; risk-return and value of the firm; financial distress and insolvency; financial sector reforms and their impact on financial management; functions of finance executive in an organisation; financial management recent developments. 2. Capital Budgeting Decisions Planning and control of capital expenditure; capital budgeting process; techniques of capital budgeting- discounted and non-discounted cash flow methods, choice of methods; capital rationing; risk evaluation and sensitivity analysis, simulation for risk evaluation; linear programming and capital budgeting decisions.. Meaning and significance of capital structure; capital structure vis-a-vis financial structure; capital structure planning and designing; optimal capital structure; determinants of capital structure; capital structure and valuation - theoretical analysis; EBIT EPS analysis; cost of capital; factors affecting cost of capital, measurement of cost of capital, weighted average cost of capital, marginal cost of capital; risk and leverage; measures of leverage, leverage effects on shareholders returns.. Equity, non-voting preference shares; debentures and bonds; company deposits; term loans from financial institutions and banks; international finance and syndication of loans; euro-issues and external commercial borrowings; FCCB; internal funds as a source of finance; dividend policy and retention of profits; bonus shares; deferred payment arrangements; corporate taxation and its impact on corporate financing; financing cost escalation. Q&A-.2

4 5. Dividend Policy Introduction; types, determinants and constraints of dividend policy; different dividend theories Walter s Model, Gordon s Model and Modigliani-Miller Hypothesis of dividend irrelevance; forms of dividend; dividend policy - practical considerations and legal constraints; corporate dividend practices in India; statutory framework.. Working capital - meaning, types, determinants; assessment of working capital requirements - operating cycle concept and applications of quantitative techniques; management of working capital - cash, receivables, inventories; financing of working capital; banking norms and macro aspects of working capital management.. Security analysis - fundamental approach, technical approach and efficient capital market theory; portfolio management - meaning, objectives; portfolio theory traditional approach; modern approach -CAPM model.. Financial Services Meaning, significance and scope of financial services ; types of financial services merchant banking, leasing and hire purchase, venture capital, mutual funds, factoring and forfeiting, securitisation of debt, loan syndication, custodial and corporate advisory services, credit rating. 9. Project Planning and Control Project Planning and preparation of project report; project appraisal under normal, inflationary and deflationary conditions; project appraisal by financial institutions lending policies and appraisal norms by financial institutions and banks; loan documentation and loan syndication, project review and control; social cost and benefit analysis of project. 10. Derivatives and Commodity Exchanges Concept of derivatives; financial derivatives and commodity derivatives; types of derivatives - forward contracts, futures contracts, options; participants in futures and options market, Index based derivatives and security based derivatives; derivatives and exposure management, currency forwards, currency futures, currency options and currency swaps and interest rate risk management; derivative markets in India; commodity exchanges in India. Q&A-.

5 11. Treasury Management Meaning, objectives, significance, functions and scope of treasury management; relationship between treasury management and financial management; role and responsibilities of chief finance executive; tools of treasury management; internal treasury controls; environment for treasury management; role of information technology in treasury management; liquidity management, regulation, supervision and control of treasury operations, implications of treasury on international banking.. Nature, significance and scope of forex management; foreign exchange market and its structure; foreign exchange rates and its determination; exchange rate quotes; types of exchange rates; forex trading; currency futures and options; foreign exchange risk exposures and their management; exchange rate forecasting; risk in foreign exchange business. 1. Recent Developments in Financial, Treasury and 1. Practical Problems and Case Studies. Q&A-.

6 Bird's-Eye View Paper Financial, Treasury and Years Q. No June 2011 Dec. 1. (i) 2. (a). (a). (i) 5. (a) (c).. (i) 1. (i) 2. (a) (c). (a) Question Paper Based Contents of Last Five Examinations No Chapter Name Treasury Management Dividend Policy Capital Budgeting Decisions Financial Services Capital Budgeting Decisions Nature and Scope of Financial Management Capital Budgeting Decisions Dividend Policy Financial Services Page No Q&A-.5

7 (c). (i) 5. (a).. (i) Financial Services Nature and Scope of Financial Management Financial Services Nature and Scope of Financial Management Derivatives and Commodity Exchanges Financial Services June 1. (i) 2. (a) (c) (d). (a) (c). (i) 5. (a) (c).. (i) Capital Budgeting Decisions Treasury Management Derivatives and Commodity Exchanges Nature and Scope of Financial Management Financial Services Financial Services Project Planning and Control Derivatives and Commodity Exchanges Q&A-.

8 20 Dec. 1. (i) 2. (a). (a) (c). (i) 5. (a) (c).. (i) Dividend Policy Treasury Management Capital Budgeting Decisions Dividend Policy Capital Budgeting Decisions Financial Service Project Planning and Control Financial Service Derivatives and Commodity Exchanges Capital Budgeting Decisions Project Planning and Control Nature and Scope of Financial Management Dividend Policy June 1. (i) 2. (a) (c). (a). (i) 5. (a) Nature and Scope of Financial Management Capital Budgeting Decisions Treasury Management Financial Service Nature and Scope of Financial Management Derivatives and Commodity Exchanges Dividend Policy Derivatives and Commodity Exchanges Q&A-.

9 (c).. (i) 9 Financial Services Project Planning and Control Q&A-.

10 Line Chart Page Q&A-.9

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13 Legends for the Graphs Short Notes Distinguish Between Descriptive Practical Q&A-.

14 Star Rating On the basis of Maximum marks from a chapter On the basis of Questions included every year from a chapter On the basis of Compulsory questions from a chapter Nil 1 Nature and Scope of Financial Management This Chapter Includes: Nature, Significance, Objectives and scope of financial management; Risk-return and value of the firm; Financial distress and insolvency; Financial sector reforms and their impact on financial management; Functions of finance executive in an organisation; Financial management recent developments. Marks of Short Notes, Distinguish Between, Descriptive & Practical Questions SHORT NOTES June [] Write short notes on the following: Profit maximisation vs. wealth maximisation (5 marks) Questions upto Dec. 200 are from CS Final Gr. II Old Course and from June 2009 onwards are from CS Professional Programme New Course Q&A-.1

15 Q&A-.1 O Solved Scanner CS Prof. Prog. M-II Paper Answer: Profit maximisation:- Profit maximisation is one of the objective of financial management since profit acts as a reward for taking risk and is also an icon of business performance. Evaluation of profit maximisation as one of the objectives of financial management:- Advantages of Profit Maximisation: The ultimate objective of each business is profit maximisation. Profit acts as a reward for taking risk. It helps to counteract with the future uncertainties. Profit is also an icon of business performance. Last but not the least, profit is the measuring rod which measures the financial soundness of any organisation. Disadvantages of profit Maximisation: Reasons as to why profit maximisation is not an objective of financial management:- Profit maximisation is a narrow approach. Profit is a vague term since different persons have different perspective for the very same term. It ignores the timing of return. Does not take into account the risk factor. Lastly, it is a short term concept only. Wealth Maximisation: It is a long term objectives of financial management whereby the business strives to increase the wealth of the shareholders i.e. the stockholding of individual shareholder by maximising the market price per share. Advantages of Wealth Maximisation: As against the profit maximisation, the approach of wealth maximisation is long term in nature. It does consider the timing impact. It takes into account the concept of risk and uncertainty. Disadvantages of Wealth Maximisation: Lack of direct relationship between financial decisions and prices of shares. Merely an increase in shareholder s wealth does not lead to wealth maximisation since there exist a large number of other stake holders also Dec [] Write notes the following: Economic value added (EVA) and wealth-maximisation. (5 marks) Answer: EVA is short for Economic Value Added. EVA stands for cash flow after tax of a business less the cost of capital. Now a days EVA is used in determining the value of a firm since it is a true indicator as against earnings

16 Solved Scanner CS Professional Programme Financial, Treasury and Paper Dec % OFF Publisher : Shuchita Prakashan ISBN : Author : Dr. Arun Kumar and CA Ankur Garg, CA Ankit Garg Type the URL : Get this ebook