FIN122.3
BBA, Specialization, Finance
Course Objectives:
The course aims to equip students with basic concepts and necessary skills in raising capital for and managing financial assets of a firm. Finance I and Finance II are pre-requisite for this course. The course will cover the following topics.
Course Contents:
1. Measuring Capital Structure and Cost of Capital 6 hours
Cost of capital, cost of debt capital, cost of equity capital, weighted average cost of capital, its use and limitations. Measuring capital structure, calculating required return.
2. Theories of Capital Structure 6 hours
Factors affecting capital structure: MM proposition under perfect market assumption; Adjustment for market imperfections-tax, financial distress, agency problem, incentive effect of debt, information asymmetry; Static Tradeoff Theory; Pecking order theory of capital structure.
3. Security Structure of Firm 6 hours
Common stock, Preferred stock, convertible debt, warrants and options, and relevant components of Nepalese laws ad regulations (e.g, Company Act, Securities Board's regulations) affecting security design.
4. Measuring and Evaluating Financial Performance 9 hours
Analysis of financial statements- Balance Sheet, Income Statement, and Cash Flows. Breakeven analysis, analysis of financial ratios, Economic value added (EVA) and limitations of such analysis. Applications of the concepts learnt in analysing companies and industries in the local market.
5. Methods of Raising Capital
Commercial Lending (by banks and financial institutions): credit analysis, loan covenants, principles and applications.
Leasing: significance, types of leases, accounting for leases, the financing decision, lease vs. borrow, lessor's point of view, lessee's point of view
Public issue of debt and equity: merits and demerits, rights offering, effect on the position of old and new shareholders
Venture Capital Its structure in the developed market; prospects for adopting in Nepalese environment
6. Liquidation or turnaround of distressed firm 3 hours
Financial distress; resolving financial distress; private workout and liquidation; legal and regulatory constraints.
7. Harvesting Business Investment 3 hours
Planning exit strategy; systematic liquidation, initial public offering, selling to acquiring firm, and current and potential use of these techniques in local market.
Text Books:
1. James C. Van Horne: Financial management and Policy, Prentice- Hall of India Pvt. Ltd
2. Brealey, Richard A. and Stewart C. Myers: Principles of Corporate Finance, McGraw-Hill
Reference Books:
1. Leach, J. C, Melicher, Ronald W, Entrepreneurial Finance, Thomson south -Western
2. Brealey, Richard A. and Stewart C. Myers: Principles of Corporate Finance, McGraw-Hill
3. Brigham, Gapanski, Ehourhardt: Financial Management and Theory, Practice, 9 th edition,
4. Archer, Readings in Finance.
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