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
Scope of Financial Management,
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
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
Minimization of risk,
Diversification of risk
Forward and futures,
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
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