Organisation : The Institute of Cost Accountants of India
Announcement : Study Notes Financial Management & International Finance
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FINANCIAL MANAGEMENT & INTERNATIONAL FINANCE
FINAL
GROUP – III
PAPER – 12
STUDY NOTES
Related / Similar Syllabus : ICMAI Corporate & Economic Laws (CEL) Syllabus 2022
SYLLABUS
Paper 12: Financial Management & International Finance
(One Paper: 3 hours: 100 marks)
OBJECTIVES :
Understand the scope, goals and objectives of Financial Management. To provide expert knowledge on concepts, methods and procedures involved in using Financial Management for managerial decision-making.
Learning Aims
** Understand and apply theories of financial management
** Identify the options available in financial decisions and using appropriate tools for strategic financial management
** Identify and evaluate key success factors in the financial management for organisation as a whole
** Evaluate strategic financial management options in the light of changing environments and the needs of the enterprise
** Determining the optimal financial strategy for various stages of the life-cycle of the enterprise
** Critically assess the proposed strategies Skill set required
Level C: Requiring all six skill levels – knowledge, comprehension, application, analysis, synthesis, and evaluation
CONTENTS :
1. Overview of Financial Management 10%
2. Financial Management Decisions 15%
3. Financial Analysis & Planning 10%
4. Operating and Financial Leverages 5%
5. Financial Strategy 15%
6. Investment Decisions 15%
7. Project Management 10%
8. International Finance 10%
9. Sources of International Finance 5%
10. International Monetary and Financial System 5%
1. Overview of Financial Management
** Finance and Related Disciplines
** Planning environment
** Key decisions of Financial Management
** Emerging role of finance managers in India
** Earnings distributions policy
** Compliance of regulatory requirements in formulation of financial strategies
** Sources of finance – long term, short term and international
** Exchange rate – risk agencies involved and procedures followed in international financial
operations
2. Financial Management Decisions
** Capital structure theories and planning
** Cost of capital
** Designing Capital Structure
** Capital budgeting
** Lease financing
** Working capital management
** Financial services
** Dividend and retention policies
** Criteria for selecting sources of finance, including finance for international investments
** Effect of financing decisions on Balance Sheet and Ratios
** Financial management in public sector
** Role of Treasury function in terms of setting corporate objectives, funds management – national and international
** Contemporary developments – WTO, GATT, Corporate Governance, TRIPS, TRIMS, SEBI regulations as amended from time to time
3. Financial analysis & planning
** Funds flow and cash flow analysis
** Financial ratio analysis -Ratios in the areas of performance, profitability, financial adaptability, liquidity, activity, shareholder investment and financing, and their interpretation.
** Limitations of ratio analysis Scope of Financial Management
** Identification of information required to assess financial performance
** Effect of short-term debt on the measurement of gearing.
4. Operating and financial leverages
** Analysis of operating and financial leverages
** Concept and nature of leverages operating risk and financial risk and combined leverage
** Operating leverage and Cost volume Profit analysis – Earning Before Interest and Tax (EBIT) and Earning Per Share (EPS), indifference point.
5. Financial Strategy
** Financial and Non-Financial objective of different organizations
** Impact on Investment, finance and dividend decisions
** Sources and benefits of international financing
** Alternative Financing strategy in the context of regulatory requirements
** Modeling and forecasting cash flows and financial statements based on expected values for variables – economic and business
** Sensitivity analysis for changes in expected values in the models and forecasts
** Emerging trends in financial reporting
6. Investment Decisions
** Costs, Benefits and Risks analysis for projects
** Linking investment with customer’s requirements
** Designing Capital Structure
** The impact of taxation, potential changes in economic factors and potential restrictions on remittance on these calculations
** Capital investment real options
** Venture Capital financing
** Hybrid financing / Instruments
7. Project Management
** Project Identification and Formulation
** Identification of Project opportunities
** Project Selection Consideration and Feasibility Studies
** Project appraisal & Cost Benefit analysis
** Source of Project Finance & Foreign Collaboration
8. International Finance
** Diversification of risk
** Forward rate agreements
** Interest rate swaps
** Caps, floors and collars
** Parity theorems
** FDI
** Money market hedge
** Options.
9. Sources of International Finance
** Rising funds in foreign markets and investments in foreign projects
** Forward rate agreements and interest rate guarantees
** Transaction, translation and economic risk, Interest rate parity, purchasing power parity and the Fisher effects
** Foreign Direct Investment
10. International Monetary and Financial System
** Understanding the International Monetary System
** Export and Import Practices
** International Financial Management: Important issues and features, International Capital Market
** International Financial Services and Insurance: Important issues and features
Study Note – 1
OVERVIEW OF FINANCIAL MANAGEMENT
1.1 Finance and Related Discipline
This Section includes :
** Meaning and Definition of Finance
** Meaning and Definition of Financial Management
** Finance and Related Disciplines
** Economics
** Accounting
** Production
** Marketing
** Quantitative Methods
** Costing
** Law
** Taxation
** Treasury Management
** Banking
** Insurance
** International Finance
** Information Technology
INTRODUCTION :
Finance is called “The science of money”. It studies the principles and the methods of obtaining control of money from those who have saved it, and of administering it by those into whose control it passes. Finance was a branch of Economics till 1890. Economics is defined as study of the efficient use of scarce resources. The decisions made by business firm in production, marketing, finance and personnel matters form the subject matters of economics. Finance is the process of conversion of accumulated funds to productive use. It is so intermingled with other economic forces that there is difficulty in appreciating the role it plays.
MEANING AND DEFINITION OF FINANCE :
Howard and Uptron in his book Introduction to Business Finance defined, “as that administrative area or set of administrative function in an organization which relate with the arrangement of cash and credit so that the organization may have the means to carry out its objectives as satisfactorily as possible”.