Unit 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