Introduction to Business Finance
Career opportunities in finance
Forms of business organization
Goals of the corporation
Agency relationships
Balance sheet
Income statement
Statement of cash flows (FASB Opinion No. 95) (IAS 7)
Accounting income vs. cash flow
Personal taxes
Corporate taxes
Ratio analysis
Du Pont system
Effects of improving ratios
Limitations of ratio analysis
Qualitative factors
Forecasting sales
Projecting the assets needed to support sales
Projecting internally generated funds
Projecting outside funds needed
Deciding how to raise funds
Seeing the effects of a plan on ratios
Stand-alone risk
Portfolio risk
Risk & return: CAPM/SML
Future value
Present value
Rates of return
Amortization
Key features of bonds
Bond valuation
Measuring yield
Assessing risk
Features of common stock
Determining common stock values
Bonus/Right shares
Efficient markets
Preferred stock
Sources of capital
Component costs
Adjusting for flotation costs
Adjusting for risk
Recommended Text:
1. Peirson, Grahem & Brown, Rob (1998), Business Finance, McGraw Hill, Sydney.
2. Block, Stanely B. & Hirt, Geoffroy A, (2002), Business Finance, Irwin Book,
Melicher, W.R & Norton, A.E, (2005), Finance, John Wiley and Sons, Inc.
Corporate Finance
Introduction to Corporate Finance Financial decision making in corporations Types of
finances, Financial instruments and markets, Short and long term financing Valuation
principles, Required Rates of Return and risk, Internal & external financing Spontaneous
financing, Short term financing tools.
Financial statements and cash flows The cash flow statement, The income statement and
statement of retained earnings The balance sheet, Relationship between book value and
market value
Understanding the Interest Rates: General level of interest rates, Foreign Borrowing and
lending, Purchasing power parity, Structure of interest rate
Valuing Debt and Equity: Value debt and preferred stock, Pure-discount instruments,
Coupon bonds, zero coupon, perpetual & reserve bonds, Amortized instruments,
Preferred stock, their types and valuation. Valuing equity, A single period common stock,
A multi-period common stock, The constant growth dividend & growth in stages.
Implications for managers.
Lease and loan financing, Introduction to financing decisions Description of financial
instruments Private Sources of financing Commercial banks and other financial
intermediaries, Ventures capitalists Issuing securities to the public.
Long-term financial policy: Dividends Policy: How companies distribute value to the
owners, Cash dividends, Share repurchases, Stock dividends and stock splits, When
dividend policy is irrelevant, The effect of financial market imperfections, The effect of
asymmetric imperfections, Establishing a dividend payout-earnings retention policy.
Capital structure theory: Operating & Financial leverage, Cost of Capital
Restructuring: Restructuring company’s assets and claims, Mergers, Acquisitions,
divestitures and buyouts
Recommended Books
1. Gary W. Emery, Corporate Finance; Principles and Practice
2. Van Horne, Financial Management and policy.
3. Gitman, Principles of Managerial Finance.
4. Brealey and Byers, Corporate Finance, McGraw Hill
5. Rose, Corporate Finance.
Investment and Portfolio Management
Introduction to Investments
Types of Investments
Investment Return
Risk and Return
The Measurement of Risk
The Theory of Risk and Return – Mean-variance
International Diversification
Overview of the Structure and Functioning of Investment Markets, Margin, Business
Cycle Analysis
Market Participation, Market structure and market efficiency
Sources of Investment Information, Equities, Money and Currency Market
Long-Term Fixed Income Securities, Fundamental Analysis, Securities Analysis
Portfolio Construction and evaluation
Capital Assets Pricing Model, Arbitrage Pricing Theory
Stock Exchange Terminologies, Working in Pakistan, Settlement of Accounts
Regulatory Environments, Credit Rating
Introduction of Major Stock Markets
Recommended Books
1. Charles P. Jones., Investment Analysis and Management
2. Mandel, L. and Thomas J. O’Brian. Investment
3. William F. Sharpe Gordon. Investment
4. Robert A. Haugen. Modern Investment Theory
5. Lawrence J. Gitman. Fundamentals of Investment.
6. Ramesh K.S. Rao, Fundamental of Financial Management,
7. Rayes, Doughlas A, Investment Analysis and Management
International Finance
Multinational Financial Management, Goal of MNC, Theories of International Finance,
International Business Methods, International Opportunities, Exposure to International
Risk, Overview of an MNC’s Cash Flows, Valuation Model for an MNC
International Flow of Funds, Balance of Payments, International Trade Flows, Factors
affecting International Trade Flows, Correcting a Balance of Trade Deficit, International
Capital Flows, Agencies that facilitate international flows, How international trade affects
MNCs
International Financial Markets, Motives for using international financial markets,
Foreign exchange market, Eurocurrency market, Eurocredit market, Eurobond market,
International stock markets, Comparison of international financial markets, International
stock diversification
Exchange rate determination, Measuring exchange rate movement, Exchange rate
equilibrium, Factors that influence exchange rates, Speculating on exchange rate
Currency Derivatives, Forward market, Currency futures market, Currency Options
market, Currency Call Options, Currency Put Options
Currency Options market, Currency Call Options, Currency Put Options, numerical
Government Influences on exchange rates, Exchange rate systems, A single European
currency, Government intervention, Exchange rate target zones, Intervention as a trade
policy
International Arbitrage and Interest Rate parity, International Arbitrage, Interest Rate
parity, Correlation Between Spot and Forward rates
Relationships between inflation, interest rates and exchange rates, Purchasing Power
Parity, International Fisher Effect, Comparison of IRP, PPP and IFE theories
Measuring exposure to exchange rate fluctuations, Is exchange rate risk relevant? Types
of exposures, Transaction exposure, Economic exposure, Translation exposure
Managing transaction exposure, Transaction exposure, Techniques to eliminate
transaction exposure, Limitations of hedging, Hedging long-term Transaction exposure,
Alternative hedging techniques, How transaction exposure management affects an
MNC’s value
Managing economic exposure, Economic exposure, Managing translation exposure, How
Managing economic exposure affects an MNC’s Value
Direct Foreign Investment (Optional), Direct Foreign Investment, Decisions subsequent
to DFI, Host government view of DFI, Impact of DFI decisions on an MNC’s Value
Financing international trade, Payment methods for international trade, Trade finance
methods, Agencies that motivate international trade, Impact of international trade
financing on an MNC’s Value
Recommended Books
1. Madura, Jeff (2000) International Financial Management, 6th edition, South-Western
College Publishing
2. Levi, D. Maurice, International Finance, 3rd Edition, McGraw Hill International
Edition
3. Shapiro, A. C., Multinational Financial Management, 5th Edition, Prentice Hall
International Edition
4. Eitman, Stonhill and Moffett; Multinational Business Finance, Addison-Wesley
Publishing Company
5. Maximo V. Eng. et al. Global Finance, Harper Collins College of Publishers
Financial & Regulatory Institutions
What is a bank? The financial system and competing financial services institutions.
Services banks and many of their closest competitors offer the public. Key trend affecting
banks and other financial services firms. Are traditional banks deed?
The organisation and structure of the commercial banking industry. The array of
corporate organisational structures in banking. Two alternative types of banking
organisations available as the 21st century opened. The changing organisation and
structure of banking’s principal competitors. Efficiency and size: Do bigger financial
firms operate at lower cost. Banking and financial firm goals: their impact on operating
cost, efficiency and performance.
Organisation of Money Market in Pakistan. Money market structure. State bank of
Pakistan. Commercial Banks. Co-operative Banks. Cooperative credit societies. Saving
banks. Micro finance institutions. The state bank of Pakistan as Central Bank. SBP
banking services corporations. Prudential regulations.
Specialized Credit Institutes IDBP, SME BANK, HBFC.
The Securities and Exchange Commission of Pakistan
o The Securities and Exchange Commission of Pakistan Act, 1997
o The Securities and Exchange Ordinance, 1969
o The Securities and Exchange Rules, 1971
o The investment companies and investment advisers rules, 1971
o The credit rating companies rules, 1995
o The asset management companies rules, 1995
Oil & Gas Regulatory Authority
National Electric Power Regulatory Authority
Monopoly Control Authority
Recommended Text:
1. Siddiqui. H. Asrar (7thedition), Practice and Law of Banking in Pakistan, Royal Book
Company Karachi.
2. Rose S. Petert, Hudgins C Sylvia (6thedition), Bank Management & Financial Services,
McGraw Hill International.
