BBA

Course Title: Financial Management
Code: MGT 142
Area of Study: Core
Credit Hour: 3
Course Objective:
The objective of this course is to create an understanding of the basic concepts, principles and techniques of
financial management among students. It also aims to enable them to apply this knowledge in real-life situations
and take appropriate financial decisions.
Course Contents:
UNIT I: Recap of Business Finance L.H. 3
Cost of Capital; Bond Valuation; Common Stock Valuation
UNIT II: Capital Budgeting: Cash-flow Principles L.H. 4
Project Classifications; Identifying and Computing relevant cash-flows in cases of Expansion and Replacement
– Initial investment, Net Operating Income, Terminal Cash-flow;
UNIT III: Capital Budgeting Techniques L.H. 6
Capital Budgeting Techniques – Payback Period, Discounted Payback Period, Accounting Rate of Return, Net
Present Value, Internal Rate of Return, Modified Internal Rate of Return, Profitability Index;
UNIT IV: Short-term Financial Planning L.H. 4
Sources of Short-term Financing; Features of Short-term Financing;

PURBANCHAL UNIVERSITY, Faculty of Management
Bachelor of Business Administration
2012

50
Cost of Trade Credit; Short-term Bank Loans – Promissory Note, Line of Credit, Revolving Credit Agreement;
Cost of Bank Loans – Simple Interest, Discount Interest and Effect of Compensating Balance on Discount
Interest, Add-on Interest;
UNIT V: Working Capital Management L.H. 5
Concept of Working Capital; Working Capital Terminology; Working Capital Cash-flow Cycle – Operating
Cycle and Cash Conversion Cycle;
Current Assets Investment Policies – Conservative, Moderate, Aggressive; Current Assets Financing Policies –
Conservative, Matching maturity, Aggressive; Choosing Overall Working Capital Policy;
UNIT VI: Cash and Marketable Securities L.H. 5
Motives for Holding Cash;
Cash-flow Synchronization – Float; Collection Techniques – Concentration Banking and Lockbox System;
Cash Management Models – Baumol Model and Miller-Orr Model;
UNIT VII: Receivables Management L.H. 5
Purposes of Receivables; Key terms – Average Collection Period, Average Daily Sales, Average Investment in
Receivables;
Aging Schedule and Payment Pattern Approach;
Credit Policy – Credit Period, Credit Standards, Collection Policy, Cash Discounts
Evaluation of Proposed Changes in Credit Policy;
UNIT VIII: Inventory Management L.H. 6
Need for Inventory Management;
Types and Computation of Inventory Costs;
Economic Order Quantity, Safety Stock, Reorder Point;
Impact of Quantity Discounts on EOQ
Inventory Control Systems – ABC Analysis, Just-in-Time Approach, Red-line Methods
UNIT IX: Lease Financing L.H. 5
Types of Lease; Factors influencing Lease Decisions; Possible Advantages of Leasing;

PURBANCHAL UNIVERSITY, Faculty of Management
Bachelor of Business Administration
2012

51

Cash-flow of a lease; Lease or Buy Decision;
UNIT X: Dividend Policy L.H. 5
Dividends and Capital Gains; Factors influencing a Dividend Policy; Establishing a dividend policy and
dividend payments; Stock Repurchases, Stock Dividends, and Stock Splits;

References
Gitman, Lawrence J., Principles of Managerial Finance, Harper Collins Publishers,
Brigham, E.F. and J. F. Houston, Fundamentals of Financial Management, Harcourt Asia Pte. Ltd.,
Singapore
Van Horne, James C., and John M. Wachowicz, Fundamentals of Financial Management, Pearson
Education, New Delhi

Ross, Stephan A., R. W. Westerfield, and J. D. Bradford, Fundamentals of Corporate Finance, McGraw-
Hill/Irwin, Boston

Pradhan, R. S., Financial Management, Buddha Academic Enterprises, Kathmandu