Financial Management

Financial management is something that touches the lives of nearly everyone. It’s a subject that affects our choices, dreams, and the quality of life we lead. This book is an effort to make the world of financial management less mysterious and more accessible to everyone. It doesn’t assume you’re a financial expert or have an extensive financial background. Instead, it invites you to explore the basics of financial management from a practical perspective.

As you move deeper into the chapters, you’ll uncover the essentials of financial planning, budgeting, investing, and managing risks. You’ll learn how to make planned decisions that can lead to financial security and growth. You’ll touch on investment strategies and the role of finance in business. The book has been written to meet the requirements of a global audience, and thus this book isn’t just about numbers and spreadsheets; it’s about building confidence in your financial decision-making. You’ll be introduced to real-life examples and practical insights to illustrate key concepts.

Approach this book with curiosity and an open mind. Ask questions, challenge assumptions, and apply the knowledge to your own financial journey. Remember, financial management is not a one-size-fits-all task. Everyone’s goals, dreams, and circumstances are unique, and this book is here to provide you with the knowledge and tools to customise financial management to your needs. As you turn the pages and begin your exploration of financial management, know that you’re on a path towards financial empowerment and a brighter financial future.

Thank you for joining me on this journey, and I hope this book becomes a valuable companion on your financial  adventure.

Contents –

1. Introduction to Financial Management
1.1 Introduction
1.2 Corporate Financial Objective
1.3 Financial Decisions
1.4 Dividend Policy
1.5 Corporate Governance
1.6 Summary
1.7 Questions
1.8 Assignments

2. Measurement and Analysis of Corporate Liquidity
2.1 Introduction
2.2 Assumptions and Limitations of Current Ratio
2.3 Dynamic Measurement of Corporate Liquidity
2.4 Finance Balance Sheet
2.5 Analysis and Evaluation of Finance Balance Sheet
2.6 Determinants of Corporate Liquidity
2.7 Summary
2.8 Questions
2.9 Assignments

3. Measurement and Analysis of Financial Leverage
3.1 Introduction
3.2 Measurement of the Financial Leverage of a Company
3.3 Analysis of Debt Service Capacity of a Company
3.4 Summary
3.5 Questions
3.6 Assignments

4. Analysis of Financial Leverage Effect on Profitability
4.1 Introduction
4.2 Profitability Analysis
4.3 Components of ROE: DuPont Analysis
4.4 Summary
4.5 Questions
4.6 Assignments

5. Analysis of Financial Leverage Effect on Equity Risk
5.1 Introduction
5.2 Definition of Risk
5.3 Capital Assets Pricing Model (CAPM)
5.4 Calculation of Beta Coefficient
5.5 Determinates of the Beta Coefficient of a Stock
5.6 Financial Leverage Effect on Risk (Beta)
5.7 Summary
5.8 Questions
5.9 Assignments

6. Mathematics of Valuation: Time Value of Money
6.1 Introduction
6.2 Interest Rate Theory
6.3 Yield Curve
6.4 Calculation of Present Values
6.5 Compounding Frequency
6.6 Summary
6.7 Questions
6.8 Assignments

7. Capital Budgeting: Strategic Investment Analysis Techniques
7.1 Introduction
7.2 Definition of Capital Budgeting
7.3 Capital Budgeting Techniques
7.4 Summary
7.5 Questions
7.6 Assignments

8. Analysis and Evaluation of Operating Profitability
8.1 Introduction
8.2 Analysis and Assessment of Operational Profitability
8.3 Free Cash Flow of the Firm (FCFF)
8.4 Summary
8.5 Questions
8.6 Assignments

9. Analysis of Statement of Cash Flows
9.1 Introduction
9.2 Statement of Cash Flows (SCF)
9.3 Analysis of Statement of Cash Flows (SCF)
9.4 Summary
9.5 Questions
9.6 Assignments

10. Corporate Growth Management
10.1 Introduction
10.2 Sustainable Sales Growth Rate
10.3 Managerial Actions Necessary to Make ASGR Equal to SSGR
10.4 Summary
10.5 Questions
10.6 Assignments

11. Financial Distress Prediction
11.1 Introduction
11.2 Altman Z Score
11.3 Other Methods of Predicting Financial Distress
11.3.1 Springate Method
11.3.2 Zmijewski Method
11.3.3 Grover Method
11.4 Accuracy Rate
11.5 Summary
11.6 Questions
11.7 Assignments

12. Weighted Average Cost of Capital (WACC)
12.1 Introduction
12.2 Definition of Weighted Average Cost of Capital (WACC)
12.3 Applications of WACC
12.4 Determinants of WACC
12.5 Calculations of the WACC
12.6 Summary
12.7 Questions
12.8 Assignments

13. Company Valuation
13.1 Introduction
13.2 Concepts of Value
13.3 The Discounted Cash Flow Model: A General Valuation Model
13.4 Determinants of Economic Value of a Company
13.5 The Concept of Threshold Operating Profit Margin (T-OPM)
13.6 Managerial Actions and Positive Economic Profit
13.7 Summary
13.8 Questions
13.9 Assignments

14. Dividend Policy
14.1 Introduction
14.2 Definitions of Dividend
14.3 Dividend Policy
14.4 Determinants of Dividend Payment
14.5 Measurement of Dividend Payment
14.6 Major Theories of Dividend Policy
14.6.1 Theories of Irrelevance of Dividend Policy
14.6.2 Dividend Relevance Theory: Bird-in-the-Hand Theory (BTD)
14.7 Dividend Announcement
14.8 Stock Dividend and Stock Split
14.8.1 Stock Dividend
14.8.2 Stock Split
14.9 Summary
14.10 Questions
14.11 Assignments