Topic outline

  • Welcome to "FIN-101: Principles of Finance" by NMZ

    Course Instructor:
    Nurul Mohammad Zayed
    Assistant Professor & Head
    Department of Real Estate
    Faculty of Business & Entrepreneurship
    Daffodil International University, Dhaka, Bangladesh. 


     Counselling Hour: 9 to 10 am (except Friday, Saturday)


    Happy learning Instruction: 

    Course Introduction

    This course provides an introductory survey of the field of finance. It examines the agents, instruments, and institutions that make up the financial system of the modern economy, such as bonds, the stock market, derivatives, and the money market. Along the way, standard concepts and tools of financial analysis are introduced: present discounted value, option value, and the efficient market hypothesis. Recent developments in the field—in particular, the application of psychology to financial markets (called behavioral finance)—are also discussed. The course is designed to equip students with the tools they need to make their own financial decisions with greater skill and confidence. Specifically, we see how insights from academic finance can inform and improve students' own investing decisions.

    Course Objectives: 

    At the completion of this course, students will be able to:

    • explain the objectives of the financial manager and how the organizational structure of a corporation affects financial decisions;
    • explain the concept of the time value of money, how the present value calculation is related to the future value calculation, and how those are used in the valuation of financial instruments and applied to elements of stock and bond valuation;
    • explain the rules and methods in capital budgeting when making financial decisions;
    • explain the use of the CAPM model for estimating valuations of a company's rate of return;
    • understand the relationship between investment risk and reward in finance and the application of that to financial principles;
    • describe the principles and tools of working capital management and be able to classify long-term and short-term capital;
    • distinguish between debt and equity instruments, their associated uses and characteristics and their impact on a firm's capital structure, the relevant details of their rate, ownership, and repayment structures, and their unique risks and relationships to market and economic events
    • understand the considerations in making capital investment decisions; and
    • interpret, prepare, and distinguish between the types of financial statements and their uses.

    Course Content:

    Unit 1: The Role and Environment of Managerial Finance
    Unit 2: Time Value of Money: Future Value, Present Value, and Interest Rates
    Unit 3: Risk and Return by Applying the CAPM Model
    Unit 4: Corporate Capital Structure, Cost of Capital, and Taxes
    Unit 5: Securities Valuation 
    Unit 6: Financial Statements and Analysis
    Unit 7: Capital Budgeting Techniques

    Textbook:

    Principles of Managerial Finance- Lawrence J. Gitman. (12th Edition)

    Reference Book:

    1.  Essentials of Managerial Finance - Basely Brigham (12th Edition).
    2.  Financial Management - Professor M. Shahjahan Mina, (5th Edition)
    3.  Financial Management- C.P. Jones (10th Edition)
    4.  Fundamentals of Managerial Finance - J. C. Van Horne

    Assessment strategy:

        • Attendance: 7

        • Quiz: 3 quizzes equal marks of 15 (average marks will be counted out of 15)
        • Assignment: 5
        • Presentation: 8
        • Mid: 25
        • Final: 40

  • This topic

    my Announcements and your Query

  • Assignment and Presentation (Individual)

    Assignment: students should individually report an assignment with the interpretation of upcoming year trading situation after calculation of the Financial ratios from any annual Report of consecutive two years of any traditional bank (traded in Dhaka Stock Exchange or Chittagong Stock Exchange) with the detail of:
    1. balance sheet
    2. income statement
    3. no of share
    4. net profit of respective years.

    Presentation: thereafter students should prepare a presentation on their findings.


    • Unit 1: The Role and Environment of Managerial Finance


      Overview with Objectives:

      Finance is a broad subject, and financial decisions are all around us. Whether you work on Wall Street or in a small company, finance is vital to every business. Therefore, understanding the fundamentals of finance is vital to your business education. This introductory unit addresses fundamental concepts of finance, stocks, and bonds. Also, Unit 1 exposes the importance of understanding ratios for financial statement analysis and analysis of cash flows. The main ratios explained are solvency (or liquidity ratios), financial ratios, profitability ratios, and market value ratios. In addition, you will learn about financial growth, what financial factors determine growth, the importance of maintaining a sustainable growth rate, and how to use financial statement information to manage growth. Consider this situation: You are the manager of a small retail chain and your boss has given you the task of deciding whether to invest in a second store. You know that adding a second store means a greater potential for growth. However, you also know that adding a new store will require spending cash. Facing this tough decision, how could you determine whether the company can "handle" such an investment? The answer might lie in ratio analysis. This section will explain how to use financial ratios to help you make these types of business decisions.

      learning outcome:

      • Concept &  Major    Areas   and    Opportunities   in Finance, 
      • The Managerial Finance Function,
      • Activities of the Financial Manager,
      • Goals of a firm,
      • Financial Institutions & Markets,
      • Agency Problem.

    • Unit 2: Time Value of Money: Future Value, Present Value, and Interest Rates



      Overview with Objectives:
      Suppose you have the option of receiving $100 dollars today vs. $200 in five years. Which option would you choose? How would you determine which is the better deal? Some of us would rather have less money today vs. wait for more money tomorrow. However, sometimes it pays to wait. Unit 2 introduces the concept of the time value of money and explains how to determine the value of money today vs. tomorrow by using finance tools to determine present and future values. Also, Unit 2 exposes the concept of interest rates and how to apply them when multiple periods are considered.

      learning outcome:
      • Concepts,
      • Importance, 
      • Compounding, 
      • Future value   & present value of   single  cash  flow,  
      • Future value   & present value of Multiple   cash  flow,
      • Annuity, 
      • Discounting,
      • Amortization Schedule

    • Unit 3: Risk and Return by Applying the CAPM Model


      Overview with Objectives:
      Unit 3 provides an explanation of the relationship between risk and return. Every investment decision carries a certain amount of risk. Therefore, the role of the financial manager is to understand how to calculate the "riskiness" of an investment so that he or she can make sound financial and business decisions. For example, you are the financial manager for a large corporation and your boss has asked you to choose between two investment proposals. Investment A is a textile plant in a remote part of a third world country. This plant has the capacity to generate $50 million dollars in yearly profits. Investment B is a textile plant located in the United States, near a small Virginia Town with a rich textile industry tradition. However, investment B's capacity for profits is only $30 million (due to higher start-up and operating costs). You are the financial manager. Which option do you choose? While investment A has the capacity to yield significantly higher profits, there is a great deal of risk that must be taken into consideration. Investment B has a much lower profit capacity, but the risk is also much lower. This relationship between risk and return is explained in this unit. Specifically, you will learn how to compute the level of risk by calculating expected values and the standard deviation. Also, you will learn about handling risk in a portfolio with different investments and how to measure the expected performance of a stock investment when it is being affected by the overall performance of a stock market. This unit puts what you have learned from the previous units about the cost of capital, net present value, and risk into one widely used model: The CAPM model. The CAPM model is used to compute a company's costs of capital that can be used in net present value calculations. It has been used in court cases for estimating a company's stock value as with the case of the breakup of AT&T in 1984 that resulted in seven companies. Also, the CAPM model is used in computing stock valuation. This unit will show how the financial manager uses this financial tool to value stock and to determine which stocks are the better options for investors, based on their rates of returns and how they compare to the overall stock market return.

      learning outcome:
      • What is the return?
      • What is the risk-free rate?
      • How does the Capital Asset Pricing Model help to compute return?
      •  What is expected return?
      • What does CAPM calculate?
      •  What is the expected rate of return?
      • What is the required rate of return?
      • What are the criteria to determine if a financial investment should it be made?
      • What is the difference between systematic and unsystematic risk?
      • What is beta and what does it measure?
      • What is the expected return?
      • What is the Capital Asset Pricing Model?
      • How does CAPM connect the concepts of risk and return?
      • What is the risk?
      • What does it mean to be risk-averse?
      • What does the financial manager consider when balancing risk with reward?

    • Unit 4: Corporate Capital Structure, Cost of Capital, and Taxes



      Overview with Objectives:
      Does it matter whether a company's assets are being financed with 50% from a bank loan and 50% from investors' money? Does that form of capital structure, where 50% of assets come from debt and 50% from equity, influence how a company succeeds in business? This unit addresses these questions by focusing on the theory of capital structure. Specifically, Unit 5 explains the concept of capital structure and introduces you to the most common formula used when comparing a company's return to the cost of capital: The weighted average cost of capital (WACC). Also, Unit 5 exposes the concept of how tax policy affects a company's true cost of capital.

      learning outcome:
      • From where do firms get money to operate?
      • What is a stock?
      • What is a bond?
      • How do financial markets allocate resources to firms?
      •  What is capital?
      • What are the major sources of a firm's capital?
      • What is market value?
      • What is the book value?
      • What are the pros and cons of each valuation method?
      •  What does the term "capital structure" mean?
      • What is the Modigliani- Miller theorem?

    • Unit 5: Securities Valuation


      Overview with Objectives:

      Security valuation is important to decide on the portfolio of an investor. All investment decisions are to be made on a scientific analysis of the right price of a share. Hence, an understanding of the valuation of securities is essential. Investors should buy underpriced shares and sell overpriced shares.

      learning outcome:
      • Various Bond Valuation
      • Various  preferred Stock Valuation
      • Various Common  Stock Valuation

    • Unit 6: Financial Statements and Analysis



      Overview with Objectives:

      Financial data analysis is important because it provides information that can help stakeholders make such decisions.  Financial Analysis course of Imactus Learning will make learners aware that the company's management is responsible for making future decisions and planning and policy development.

      learning outcome:
      • What are the tools one can use to analyze a company's performance?
      • What would a firm use to plan operations for the future?
      • How can firms use historical performance to predict future performance?
      • How do investors value a company?
      • How do pro forma financial statements differ from standard financial statements?
      •  How are financial statements used to analyze a firm's operations and performance?
      • How do firms compare their performance across time and with their peers?
      •  Different  types of financial reports of a  company,
      • Evaluating  the   performance  of  a  company  by Financial Ratio

    • Unit 7: Capital Budgeting Techniques


      Overview with Objectives:
      This unit will show you how a financial manager makes capital investment decisions using financial tools. It is especially the case that this unit addresses the concept of capital budgeting and how to evaluate investment projects using the net present value calculations, internal rate of return criteria, profitability index, and the payback period method. In particular, this unit will teach you how to determine which cash flows are relevant (should be considered) when making an investment decision. Say, for instance, you have been asked to give your recommendation about buying or not buying a new building. As the financial manager, it is your task to identify cash flows that, in some way or another, affect the value of the investment (in this case the building). Also, this unit explains how to calculate "incremental" cash flows when evaluating a new project, which can also be considered as the difference in future cash flows under two scenarios: when a new investment project is being considered and when it is not. Make sure to complete Unit 2 first before engaging in Unit 3 as this unit is considered the advanced portion using the financial techniques that are explained in Unit 2, such as the present and future value formulas.

      learning outcome:

      • How do firms use money from their capital budgets to invest?
      • What is a "project" to a firm?
      • How do the firm's decision in which projects to invest?
      • How do we compare the NPV of only 2 projects?
      • What is depreciation?
      • How does one record the depreciation of assets?
      • Which financial statements contain depreciation?
      • What are the components of the NPV formula?
      • How can the NPV formula be modified for changes in cash flows overtime?


    • Midterm Instructions

      ❏ Midterm Syllabus 
      Unit 1: The Role and Environment of Managerial Finance
      Unit 2: Time Value of Money: Future Value, Present Value, and Interest Rates
      Unit 3: Risk and Return by Applying the CAPM Model

      ❏ Midterm Assessment Plan
      conceptual questions with real-life problem based on the syllabus 


    • Final Exam Instructions

      ❏ Final Exam Syllabus 

      • Unit 1: The Role and Environment of Managerial Finance
      • Unit 4: Corporate Capital Structure, Cost of Capital, and Taxes
      • Unit 5: Securities Valuation 
      • Unit 7: Capital Budgeting Techniques

      ❏ Final Exam Assessment Plan
      any five conceptual questions with real-life problem based on the syllabus