Learning Objectives
5 objectives- Understand the core concepts and importance of financial management within organizations.
- Analyze and interpret key financial statements to assess company performance.
- Apply time value of money principles to evaluate financial decisions.
- Evaluate investment opportunities using capital budgeting techniques.
- Examine risk-return trade-offs and implement strategies for managing financial risk.
Content Outline
Preview1. Overview of Financial Management
- Definition and scope of financial management
- Objectives of financial management: profit maximization vs. wealth maximization
- Importance of financial management in organizations
- Basic principles guiding financial decision-making (e.g., consistency, prudence, relevance)
2. Financial Statements Analysis
- Introduction to financial statements
- Income Statement: components and purpose
- Balance Sheet: assets, liabilities, and equity
- Cash Flow Statement: operating, investing, and financing activities
- Techniques for financial statement analysis
- Ratio analysis (liquidity, profitability, solvency, activity ratios)
- Trend analysis and horizontal/vertical analysis
- Common-size statements
- Assessing financial health and performance
3. Time Value of Money
- Concept and importance of time value of money
- Present Value (PV) and Future Value (FV) calculations
- Annuities and perpetuities
- Compounding and discounting techniques
- Applications in financial decision-making (loans, investments)
4. Risk and Return
- Understanding investment risk and return
- Types of risk: systematic vs. unsystematic
- Risk-return trade-off principle
- Diversification and portfolio theory basics
- Measuring risk (standard deviation, beta)
- Approaches to risk management
5. Capital Budgeting
- Purpose and significance of capital budgeting
- Steps in the capital budgeting process
- Evaluation techniques:
- Net Present Value (NPV)
- Internal Rate of Return (IRR)
- Payback Period
- Profitability Index
- Comparing and selecting investment projects
6. Cost of Capital
- Definition and importance of cost of capital
- Components:
- Cost of debt (after-tax)
- Cost of equity (CAPM and dividend growth models)
- Weighted Average Cost of Capital (WACC)
- Role of cost of capital in investment and financing decisions
7. Working Capital Management
- Concept and objectives of working capital management
- Components of working capital: current assets and liabilities
- Cash management techniques
- Inventory control methods
- Accounts receivable management
- Balancing liquidity and profitability
8. Financial Markets and Instruments
- Overview of financial markets:
- Money market vs. capital market
- Types of financial instruments:
- Stocks (common and preferred shares)
- Bonds (government and corporate)
- Derivatives (options, futures)
- Functions and roles in raising capital and investment
9. Financial Planning and Forecasting
- Importance of financial planning
- Budgeting process and types of budgets
- Forecasting techniques:
- Sales forecasting
- Cash flow forecasting
- Setting financial goals and resource allocation
- Monitoring and control mechanisms
10. Corporate Governance and Ethics in Financial Management
- Principles of corporate governance
- Role of boards, management, and stakeholders
- Ethical considerations in financial decision-making
- Regulatory compliance and legal frameworks
- Maintaining transparency and stakeholder trust
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