Corporate Finance and Policy
Subject Overview
Corporate Finance and Policy covers time value of money and security valuation, cost of capital and capital structure theories, leverage and capital budgeting decisions, and dividend decisions and working capital management. A 4-credit core theory paper.
Unit-wise Syllabus
4 units — click WhatsApp below to get the full notes for each
Unit 1: Financial management foundations and valuation
Meaning, evolution, objectives and scope of corporate finance, role of the financial manager, time value of money, valuation of equity/debt/hybrid securities, sources of finance (long and short term)
Unit 2: Cost of capital and capital structure
Concept and significance of cost of capital, specific and weighted average cost of capital, capital structure theories — Net Income, Net Operating Income, Traditional, Modigliani-Miller (arbitrage process and agency cost), determinants of capital structure, EBIT/EPS and ROI/ROE analysis
Unit 3: Leverage and capital budgeting
Business and financial risk, operating and financial leverage, trading on equity, nature and process of capital budgeting, investment evaluation criteria (payback, ARR, NPV, benefit-cost ratio, IRR), risk analysis and capital rationing
Unit 4: Dividend decisions and working capital
Issues in dividend decisions, forms of dividend, relevance and irrelevance theories, working capital meaning, nature, conservative/matching/aggressive approaches, static vs dynamic view, factors determining working capital, financing methods