Advanced Financial Management Notes
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Advanced Financial Management Notes

How to study this subject



OBJECTIVE
To familiarize the students with Advance Financial Management decisions.

Unit 1: INVESTMENT DECISIONS AND RISK ANALYSIS
12 Hours
Risk Analysis – Types of Risks – Risk and Uncertainty – Techniques of Measuring Risks – Risk
adjusted Discount Rate Approach – Certainty Equivalent Approach – Sensitivity Analysis -
Probability Approach - Standard Deviation and Co-efficient of Variation – Decision Tree
Analysis –Problems.

Unit 2: COST OF CAPITAL
12 Hours
Meaning and Definition – Significance of Cost of Capital – Types of Capital – Computation of
Cost of Capital – Specific Cost – Cost of Debt – Cost of Preference Share Capital – Cost of
Equity Share Capital – Weighted Average Cost of Capital – Problems.

Unit 3: CAPITAL STRUCTURE THEORIES
12 Hours
Introduction – Capital Structure – Capital Structure Theories - Net Income Approach - Net
Operating Income Approach - Traditional Approach – MM Approach – Problems.

Unit 4: DIVIDEND THEORIES
10 Hours
Introduction – Irrelevance Theory – MM Model. Relevance Theories - Walter Model - Gordon
Model – Problems on Dividend Theories.

Unit 5: PLANNING AND FORECASTING OF WORKING CAPITAL
10 Hours
Concept of Working Capital – Determinants of Working Capital – Estimating Working Capital
Needs – Operating Cycle – Cash Management – Motives of Holding Cash – Cash Management
Techniques – Preparation of Cash Budget – Receivables Management – Preparation of Ageing
Schedule and Debtors Turnover Ratio – Inventory Management Techniques – Problems on
EOQ.

UNIT 6: CORPORATE VALUATION
04 hours
DCF method, relative valuation method, net asset method, value based management.

SKILL DEVELOPMENT
Preparation of a small project report of a small business concern covering all components-
(Finance, Marketing, Production, Human Resources, General administration) (Any one
component can be selected as a title of the report)
Designing a capital structure for a Trading concern
Preparing a blue print on working capital of a small concern.
Prepare a chart on Modes of cash budget.
List out different modes of Dividend Policy.
List out the Companies, which have declared dividends recently along with the rate of
dividend.

BOOKS FOR REFERENCE
1. Narendra Singh : Advanced Financial Management
2. S N Maheshwari, Financial Management Principles and Practice.
3. Khan and Jain, Financial Management.
4. Sudarshan Reddy: Advance Financial Management
5. Sharma and Sashi Gupta, Financial Management
6. I M Pandey, Financial Management.
7. Prasanna Chandra, Financial Management.
8. PV Kulkarni & BG Sathya Prasad, Financial Management.
9. P.K. Sinha; Financial Management




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