The Islamia University of Bahawalpur Pakistan Department of Management Sciences Course Outline Course: Course Code: Credit Hours: 3 Class: Bachelor of Business Administration (BBA) Session & Semester: BBA Session 2015-19 [4 th Semester (Evening)] Course Instructor: Dr. Owais Shafique Course Instructor E-mail: dr.owais.shafique@gmail.com, owais.shafique@iub.edu.pk You may download the content for this Course from my Blog: www.drowaisshafique.wordpress.com The course syllabus, presentations, announcements, assignment, out-of-text readings, and other pertinent information are on the course website (blog above). You are expected to check this site regularly. Make sure that the email address you have registered to follow this site is the one you check regularly Course Description: course aims at imparting knowledge about the very basic concepts and tools of Business Finance. It emphasizes the importance of Business Finance skills to individuals and enterprises. It deals with the finance function in an organization, the role of the finance manager and the financial environment in which the firm operates. The financial environment covers the understanding of financial and capital markets along with the broad orientation of macro-economic factors affecting the business. The emphasis will remain on developing the skills for planning, appraising and evaluating the investment, financing and operating decisions. Business ethics with special reference to finance will also be an integral element of the course. The course will be based on latest research, documentaries associated to finance, practical projects, Case Studies, etc. To develop Critical Thinking and Analytical Reasoning skills for decision making under normal and crisis situations will be the core aim of the course. Learning Outcomes: On completion of the course, students will be able to understand: 1. History of Business Finance, its importance and the purpose to study Introduction to Business Finance. 2. Difference between accounting and Finance. Owais Shafique 1
3. Functions of business finance and finance manager. 4. Decision Making Under Intense pressure and in Crisis situations. 5. Development of Critical Thinking and Analytical Reasoning skills. 6. The basics of finance theory and its applications to corporate financial decisions. 7. Analysis of financial statements. 8. Tools and techniques of time value of money for investing decisions. 9. Concepts of risk and return for portfolio management. 10. The principles of capital structure. 11. The concept of cost of capital. 12. Importance of business Ethics in the 21 st century and its application and execution in business finance. PLAN OF EDUCATIONAL METHODOLOGY TO BE USED Knowledge Skills Lectures Research Papers, Case Studies, Activities and Practical Tasks, Simulations, Workshops, Teaching Documentaries, Multimedia Presentations, Essays, Comprehensions, Impromptus, Speeches, Group Discussions and hopefully a Seminar or Conference. COURSE CONTENTS: Weeks Week 1 Week 2 Introduction to Finance: Topics v Introduction of the Subject v The Ever Growing Importance of Finance v Why we should Study Finance? v History of Finance v Branches of Finance An Overview of Business Finance: v Finance a quick look. v Difference between Accounting and Finance v Business finance and financial manager. v Forms of business organization. v Goals of business finance. v Agency problem. v Understanding financial statements and cash flows: The balance sheet. The income statement. Taxes and window dressing. Statement of changes in Equity Dr. Owais Shafique 2
Cash flow Statement. Week 3 Week 4 Week 5 Week 6 Analyzing the Financial Statements: v Standardized financial statements. v Ratio analysis. v The Du-pont identity. v Internal and sustainable growth. v Using financial statement information. v Z Score Analysis Manufacturing, Service and Private Corporations. Time Value of Money: v The role and perspectives of the TVM concept v Future values v Present values v The relationship between future and present values v Annuities and Perpetuity v Future and present values of cash flows under high compounding frequency v Impact of higher compounding frequency v Inflation and the Time Value of Money Bond and Their Valuation: v Definition, types and features of bonds v Valuation of bonds (the basic process) v Basic relationships in bond valuation v Bondholder s expected rate of return v Risks associated with bond returns Stocks and Their Valuation: v Shares and their basic features v Benefits from a share investments v Price of ordinary shares v Behaviour of expected dividend growth and share price v Price of shares based on earnings v Expected rate of return v Preferred shares and their characteristics v Price of preferred shared and the expected rate of return v Valuing the entire business Dr. Owais Shafique 3
Mid Term Exam Week 7 & 8 Week 9 Week 10 & 11 Week 11 & 12 Capital Budgeting: v What is Capital Budgeting? v Net present value and other investment Criteria The payback period rule. Discounted payback period. The average accounting return /Accounting Rate of return. Net present value. The internal rate of return. The profitability index. The practice of capital budgeting. Risk and Return: v Expected returns and risk defined v Calculating expected return v Calculating risk (Variance and Standard deviation) v Modern Portfolio Theory (MPT) v Portfolio expected returns v Portfolio variance and standard deviation v Systematic and unsystematic risk v Diversification and portfolio risk v Capital Asset Pricing Model (CAPM) The Cost of Capital v The cost of capital concepts v Individual and weighted average costs of capital (WACC) v Costs of capital and valuation v Financial Leverage & Capital structure v Capital structure decision (No taxes or other capital market imperfections) v Taxation and capital structure decision v Debt equity ratio, cost of capital and the value of the firm v (The MM Propositions) v Optimal capital structure v Problems associated with high gearing v Costs of financial distress and bankruptcy v The static trade-off theory v Personal taxes v Evidence on capital structure determinants v Dividend Policy v Financial Planning Process Working Capital Management: v Operating Cycle Dr. Owais Shafique 4
v Working Capital Policies v Classification of Working Capital v Cash Management v Miller-Orr Model for Cash Management v Inventory Management (EOQ, EOP, JIT) v Debtor s Management v Creditor s Management v Short Term Financing Week 12 Mergers & Acquisitions, Anti-Takeover Tools and Corporate Restructuring: v Mergers & Acquisitions v Anti-Takeover Tools v Corporate Restructuring v Multinational Companies (MNC) Week 13 Financial Distress and Decision Makin under intense pressure / crisis situation: v Financial Distress (Case Studies) v Decision Makin under intense pressure / crisis situation. v Crisis Management (Case Studies) v Other Case Studies Week 13 Week 14 Foreign Exchange Markets and Tools for protection against risk: v Foreign Exchange v Hedging v Forward Rate Agreements v Futures v Options v Swaps Introduction to Islamic Finance: v Islamic Economic System in Comparison with Conventional Economic System v The concept of: Mudarba Musharqa Murabah Ijarah v Comparison with the conventional financial system Dr. Owais Shafique 5
Week 15 Week 15 Business Ethics: v Why to care about Ethics? v Importance of business Ethics in the 21 st century. v Its application and execution in business finance. Final Project & Presentations Final Term Exam RECOMMENDED TEXT BOOKS (Latest available edition): The Primary Textbooks for the course are: 1. Handouts by Dr. Owais Shafique 2. Essentials of Corporate Finance, by Ross, Westerfield and Jordan, McGraw Hill Publishers, ISBN 0-07-121057-7 3. Principles of Managerial Finance, by Lawrence J. Gitman, Pearson Education Publishers, ISBN 81-775-8554-1 Other Reference books will be: 3. Brealey, R. A. & Myers, Principles of corporate finance. 4. Jemes C. Vanhorne: Fundamentals of Financial Management 5. Eugene F. Brigham: Fundamentals of Financial Management Grading Scheme: Component Percentage Presentations, Assignments, Quizes, Class Participation, Attendance 20% Mid Term Exam 30% Final Term Exam 50% Note: The course content is not limited to what is mentioned above; additional content may also be incorporated if required. You are advised to regularly visit and subscribe to my blog for updates regarding your course. Check your E-mails, my blog and Dropbox link regularly for assignments and announcements. You may make appointment to discuss academic issues with the instructor during visiting hours. You are advised to use E-mail for your queries after office hours. Reply to your questions can be instantaneous or provided during lectures. 80% attendance is mandatory to sit in Final Term Exam. Failure to maintain 80% attendance (24 Presence and only 6 absence) would result in disqualification from examination as per university rules. Dr. Owais Shafique 6