PRINCIPLES OF FINANCE

Course Code Marks: 100 Credits: 4 Class Hours: 60
Course Title PRINCIPLES OF FINANCE
1. The Role and Environment of Finance: Finance and Business-The Managerial Finance
Function-Goal of the Firm-Financial Institutions and Markets.
2. Financial statements and analysis: The Stockholders’ Report-Using Financial Ratios-
Liquidity Ratios-Activity Ratios-Debt Ratios-Profitability Ratios-Market Ratios-A Complete
Ratio Analysis.
3. Cash Flow and Financial Planning: Developing the Statement of Cash Flows-The Financial
Planning Process-Cash Planning: Cash Budgets-Profit Planning: Pro Forma Statements-
Preparing the Pro Forma Income Statement-Preparing the Pro Forma Balance Sheet-
Evaluation of Pro Forma Statements.
4. Time value of money: The Role of Time Value in Finance-Single Amounts-Annuities-Mixed
Streams-Compounding Interest-Special Applications of Time Value.
5. Risk and Return: Risk and Return Fundamentals-Risk of a Single Asset-Risk of a Portfolio-
Risk and Return: Types of Risk-The Model: CAPM.
6. Interest Rates and Bond Valuation: Interest Rates and Required Returns-Corporate Bonds-
Valuation Fundamentals-Bond Valuation.
7. Stock Valuation: Differences Between Debt and Equity Capital-Common and Preferred
Stock-Common Stock Valuation-Decision Making and Common Stock Value.
8. Capital Budgeting Cash Flows: The Capital Budgeting Decision Process-The Relevant Cash
Flows-Finding the Initial Investment-Finding the Operating Cash Inflows-Finding the
Terminal Cash Flow-Summarizing the Relevant Cash Flows.
9. Capital Budgeting Techniques: Overview of Capital Budgeting Techniques-Payback
Period-Net Present Value (NPV)-Internal Rate of Return (IRR)-Comparing NPV and IRR
Techniques.
10. Long-Term Financial Decisions: An Overview of the Cost of Capital-The Cost of Long-
Term Debt-The Cost of Preferred Stock-The Cost of Common Stock-The Weighted Average
Cost of Capital-The Marginal Cost and Investment Decisions.
11. Leverage and Capital Structure: Leverage-The Firm’s Capital Structure-The EBIT–EPS
Approach to Capital Structure-Choosing the Optimal Capital Structure
12. Current Liabilities Management: Spontaneous Liabilities-Unsecured Sources of Short-
Term Loans-Secured Sources of Short-Term Loans.
Book Recommended:
Gitman, Lawrence G, Principles of Managerial Finance, 10th edition.
Reference Books:
1. Brigham Eugene F, Ehrhardt Michael C, Financial Management: Theory and Practice, 11th
Edition, South-Western.
2. Arthur J. Keown, John D. Martin, J. William Petty & David F. Scott, Jr. (2005), Financial
Management: Principles and Applications, Tenth Edition, Pearson Prentice Hall. (KMPS)