MODULE 2 PAPER 5:
FINANCIAL, TREASURY AND FOREX MANAGEMENT
In the present corporate world, the funds flow in and flow out from different sources. So as key managerial person, a company secretary supposed to have a thorough knowledge of compliance issues related.
The company secretaries by virtue of their expertise in the corporate laws and procedure are in eminently suitable position to:
(a)Present to the Board of Directors, the financial, legal and personnel aspects of modernisation, expansion, diversification of the existing projects of new projects;
(b) Obtain the decision from the Board; and
(c) Interact effectively with the financial institutions in the process of procuring the finance.
The legal aspects of finance are becoming increasingly important and a Company Secretary is expected to successfully and effectively handle, amongst other things, important aspects such as management of public issues, syndication of loans, obtaining project approvals, raising of finance through public deposits and debentures or bonds etc. All these essentials require expert knowledge of diverse and complex procedures involved.
Topics, such as, raising finance from financial institutions, dividend policies, etc. requiring legal expertise and procedural knowledge have been written with a legal bias. Topics such as, project appraisal, financial planning, portfolio management and securities analysis, working capital management and capital budgeting decisions, treasury management, forex management, commodity exchange and derivatives have been written keeping in view the financial management principles and the practical utility. Ample number of practical problems and case studies are incorporated in this paper to give practical experience to the students.
Nature and Scope of Financial Management
Nature, Significance, Objectives and Scope (Traditional, Modern and Transitional Approach)
Risk-Return and Value of the Firm
Financial Distress and Insolvency
Financial Sector Reforms and their Impact
Functions of Finance Executive in an Organisation
Capital Budgeting
Time Value of Money
Planning and Control of Capital Expenditure
Capital Budgeting Process
Techniques of Capital Budgeting- Discounted and Non-discounted Cash Flow Methods, Choice of Methods
Capital Rationing; Risk Evaluation and Sensitivity Analysis, Simulation for Risk Evaluation
Linear Programming and Capital Budgeting Decisions – under Constraints and with Multiple Objectives using Mathematical Programming Models, Inflation, Uncertainty and Evaluation using Statistical Decision Theory
Analysis of Capital Budgeting Decisions- Some Case Studies
Capital Structure
Meaning and Significance
Capital Structure vis-à-vis Financial Structure; Planning and Designing; Optimal Capital Structure
Determinants of Capital Structure; Capital Structure and Valuation – Theoretical Analysis
EBIT – EPS Analysis, EBITDA Analysis (Earning before Interest, Tax, Depreciation and Amortization)
Risk and Leverage; Measures of Operating and Financial Leverage, Effects of Leverage on Shareholders’ Returns
Cost of Capital
Meaning; Factors Affecting Cost of Capital
Measurement of Cost of Capital, Weighted Average Cost of Capital, Marginal Cost of Capital
Financial Services
Meaning, Significance, Scope and Structure of Financial Services
Types of Financial Services- Merchant Banking, Securitization of Debt, Loan Syndication, Housing Finance, Custodial and Advisory
Project Finance
Project Planning – Preparation of Project Report
Project Appraisal under Normal, Inflationary and Deflationary Conditions
Project Appraisal by Financial Institutions – Lending Policies and Appraisal Norms by Financial Institutions and Banks; Loan Documentation, Project Review and Control; Social Cost and Benefit Analysis of Project. (UNIDO Approach), Term Loans from Financial Institutions and Banks; Lease and Hire Purchase Finance; Venture Capital Funds; Private Equity; International Finance and Syndication of Loans, Deferred Payment Arrangements; Corporate Taxation and its Impact on Corporate Financing
Financing Cost Escalation
Dividend Policy
Introduction; Types, Determinants and Constraints of Dividend Policy
Forms of Dividend
Different Dividend Theories – Walter’s Model, Gordon’s Model and Modigliani-Miller Hypothesis of Dividend Irrelevance
Dividend Policy – Practical and Legal Constraints
Corporate Dividend Practices in India
Working Capital
Meaning, Types, Determinants and Assessment of Working Capital Requirements, Negative Working Capital
Operating Cycle Concept and Applications of Quantitative Techniques
Management of Working Capital – Cash, Receivables, Inventories; Financing of Working Capital; Banking Norms and Macro Aspects
Factoring and Forfeiting
Security Analysis and Portfolio Management
Security Analysis – Measuring of Systematic and Unsystematic Risk, Fundamental Analysis (Economic, Industry and Company), Technical Approach and Efficient Capital Market Theory
Portfolio Management – Meaning, Objectives; Portfolio Theory – Traditional Approach; Fixed and Variable Income Securities, Markowitz Portfolio Theory; Modern Approach – CAPM Model; Economic Value Added, Sharpe Single & Multi Index Model; Arbitrage Pricing Theory (APT); Risk Adjusted Measure of Performance
Derivatives and Commodity Exchanges- An Overview
Treasury Management
Meaning, Objectives, Significance, Functions and Scope of Treasury Management
Relationship between Treasury Management and Financial Management; Role and Responsibilities of Chief Finance Officer
Tools of Treasury Management; Internal Treasury Controls; Environment for Treasury Management
Liquidity Management, Regulation, Supervision and Control of Treasury Operations, Implications of Treasury on International Banking
Forex Management
Nature, Significance and Scope of Forex Management
Foreign Exchange Market and its Structure
Foreign Exchange Rates and its Determination
Exchange Rate Quotes; Types of Exchange Rates; Forex Trading; Currency Futures and Options
Foreign Exchange Risk Exposures and their Management; Exchange Rate Forecasting; Risk in Foreign Exchange Business
Practical Problems and Case Studies