Learning Objectives
5 objectives- Understand the principles and importance of strategic financial management in organizational decision-making.
- Analyze financial statements to assess a company's financial health and performance.
- Apply cost-volume-profit analysis to evaluate the impact of production and sales changes on profitability.
- Evaluate long-term investment projects using capital budgeting techniques such as NPV, IRR, and payback period.
- Identify and manage financial risks through appropriate risk management and hedging strategies.
Content Outline
PreviewUnit 1295: Strategic Financial Management
1. Introduction to Strategic Financial Management
- Definition and scope
- Importance in organizational decision-making
- Role in achieving long-term strategic goals
- Integration with overall business strategy
2. Financial Statement Analysis
- Overview of financial statements: Balance Sheet, Income Statement, Cash Flow Statement
- Key financial ratios: profitability, liquidity, solvency, and efficiency ratios
- Techniques for trend and comparative analysis
- Interpreting financial health and performance
3. Cost-Volume-Profit (CVP) Analysis
- Understanding fixed, variable, and mixed costs
- Break-even analysis and margin of safety
- Contribution margin concept
- Impact of changes in costs, volume, and price on profit
4. Capital Budgeting
- Importance of capital budgeting in strategic planning
- Cash flow estimation for investment projects
- Evaluation techniques:
- Net Present Value (NPV)
- Internal Rate of Return (IRR)
- Payback Period
- Profitability Index
- Project selection criteria and capital rationing
5. Risk Management and Hedging
- Types of financial risks: interest rate, foreign exchange, commodity price risks
- Risk identification and assessment methods
- Hedging instruments and techniques:
- Forwards and Futures
- Options
- Swaps
- Developing a risk management strategy
6. Working Capital Management
- Components of working capital: current assets and current liabilities
- Objectives of working capital management
- Cash management techniques
- Inventory management and control
- Receivables management
- Financing working capital
7. Capital Structure and Leverage
- Concept of capital structure and its importance
- Debt vs. equity financing
- Financial leverage and operating leverage
- Impact of leverage on profitability and risk
- Theories of capital structure (Trade-off theory, Pecking order theory)
8. Dividend Policy
- Understanding dividend and dividend policy
- Types of dividend policies: stable, constant payout, residual
- Factors influencing dividend decisions
- Implications of dividend policy for shareholders and the firm
9. Financial Planning and Forecasting
- Purpose and process of financial planning
- Sales and expense forecasting
- Pro forma financial statements
- Budgeting and resource allocation
- Scenario and sensitivity analysis
10. Mergers and Acquisitions (M&A)
- Overview of M&A and strategic considerations
- Valuation methods:
- Discounted Cash Flow (DCF)
- Comparable company analysis
- Precedent transactions
- Financing options for M&A
- Integration challenges and value creation
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