Unit 955: Business Finance Fundamentals

1. Introduction to Business Finance

1.1 Role and Importance of Finance in Business

• Definition and scope of business finance
• Finance as a function in organizations
• Importance in decision making and growth

1.2 Basic Financial Concepts

• Financial resources and sources
• Risk and return
• Value creation

1.3 Financial Statements Overview

• Balance Sheet
• Income Statement
• Cash Flow Statement

1.4 Goal of Maximizing Shareholder Wealth

• Shareholder wealth maximization concept
• Relationship to business objectives

2. Financial Analysis and Planning

2.1 Analyzing Financial Statements

• Vertical and horizontal analysis
• Common size statements

2.2 Ratio Analysis

• Liquidity ratios
• Profitability ratios
• Solvency ratios
• Efficiency ratios

2.3 Financial Forecasting

• Techniques: trend analysis, regression
• Pro forma financial statements

2.4 Budgeting

• Types of budgets (operating, capital, cash)
• Budget preparation and control

3. Time Value of Money

3.1 Fundamental Concepts

• Present value (PV) and future value (FV)
• Discounting and compounding

3.2 Annuities and Perpetuities

• Ordinary annuities
• Annuities due
• Perpetuities

3.3 Applications

• Investment appraisal
• Loan amortization
• Retirement and savings planning

4. Capital Budgeting

4.1 Investment Decision Process

• Identification and evaluation of projects

4.2 Techniques

• Net Present Value (NPV)
• Internal Rate of Return (IRR)
• Payback Period
• Profitability Index (PI)

4.3 Comparative Analysis and Decision Criteria

• Advantages and limitations of each method
• Selecting projects under capital rationing

5. Cost of Capital

5.1 Cost of Debt

• After-tax cost of debt
• Debt instruments

5.2 Cost of Equity

• Dividend Discount Model (DDM)
• Capital Asset Pricing Model (CAPM)

5.3 Weighted Average Cost of Capital (WACC)

• Calculation and interpretation
• Role in investment decisions

6. Working Capital Management

6.1 Components of Working Capital

• Current assets: cash, accounts receivable, inventory
• Current liabilities: accounts payable, short-term debt

6.2 Managing Liquidity and Profitability

• Cash management techniques
• Inventory management
• Receivables management

6.3 Working Capital Financing

• Short-term financing options
• Trade credit management

7. Risk and Return

7.1 Relationship Between Risk and Return

• Risk types: systematic and unsystematic
• Measuring risk: variance and standard deviation

7.2 Diversification and Portfolio Theory

• Benefits of diversification
• Efficient frontier

7.3 Capital Asset Pricing Model (CAPM)

• Formula and assumptions
• Estimating expected returns

8. Financial Markets and Institutions

8.1 Role of Financial Markets

• Primary and secondary markets
• Stock markets and bond markets

8.2 Financial Institutions

• Commercial banks
• Investment banks
• Mutual funds and pension funds

8.3 Market Instruments

• Equity securities
• Debt securities
• Derivatives

9. International Finance

9.1 Globalization and Financial Management

• Impact on business finance

9.2 Foreign Exchange Markets

• Exchange rates and quotations
• Spot and forward markets

9.3 International Investment Decisions

• Evaluating foreign projects
• Political and economic risks

9.4 Managing Currency Risk

• Hedging techniques
• Currency derivatives

9.5 Opportunities and Challenges in International Finance

• Capital flows
• Regulatory environment
• Cross-border financial management