Course objective:

This course aims to expose students to strategic applications of core
finance concepts and acquaint them with the abilities to understand the entire range of strategic financial decision making situations.

Unit I

Strategic Financial Management: Meaning, nature and scope. Financial and non financial objectives, agency theory and conflict of interest in a firm. Strategic decision making framework, interface of financial policy and strategic management,shareholder’s value creation and value drivers.

Corporate Risk Management: Meaning, nature and components of risk. Introduction to financial instruments like Forward, Futures and Options and Swaps as risk management tools. Risk management in practice.

Financial Planning and Forecasting Ratios System: Introduction to long-term and short-term financial planning in a company, types of financial planning models, growth with internal equity, Higging’s sustainable growth model, conditions for the successful use of models, development of Simulations Models and improving financial modelling.

Unit II

Corporate Valuation: Introduction, models and approaches to corporate valuationMarakon Approach, Alcar Approach, Mckinsey Approach and Discounted Cash Flow Approach– FCFE and FCFF model. Shareholder’s Value Creation – MVA Approach;
EVA Approach and EVA Analysis of Indian Corporates. Managerial implications of shareholder’s value creation.

Long-term Projects: Valuation of long-term investment decisions, capital intensive projects – Sensitivity analysis; risk-adjusted discount rates; Modified IRR and real options.

Unit III

Capital Structure Policy: Business and financial risk – total risk perspective and market risk perspective – determinants of capital structure decision – approaches to estimate the
target capital structure – variations in capital structures, EBIT / EPS Analysis and ROI / ROE analysis.

Capital Structure Theories: Net Income Approach – Net Operating
Income Approach – Traditional Approach – Modigliani-Miller Model (MM), Miller Model – criticism of MM and Miller models – financial distress and agency cost –asymmetric information theory.

Dividend and Bonus Policy: Dividend policy decisions, payout ratio, stability, residual payment, corporate dividend policies, repurchase or buyback of shares bonus issues and stock splits.

Unit IV

Working Capital Management: Meaning, nature, concepts of working capital, operating cycle, permanent and temporary working capital, factors determining working capital. Approaches to working capital management. Sources of finance of working capital. Role of factoring services and securitization in working capital management.

Financial distress and corporate restructuring: Introduction; methods of corporate restructuring (Both internal as well as external); Government policies for revival of sick units and turnaround strategies.