Part One: The Investment Decision
Unit 1: Introduction to Financial Management
Section 1: Individual Consumption and Investment
Introduction
1.1 Consumer choice in a perfect market
1.2 Consumption-investment decision
1.3 Consumption, investment and the concept of utility
1.4 Wealth maximisation with borrowing and lending opportunities
Section 2: Fisher's Separation Theorem and Capital Market Efficiency
Introduction
2.1 Fisher's Separation Theorem
2.2 Capital market efficiency
2.3 Random walk concept
Section 3: Efficient Market Hypothesis
Introduction
3.1 EMH and financial management
3.2 EMH as 'bad science'
Unit 2: Capital Investment Appraisal
Section 1: Review of Capital Investment
Introduction
1.1 Capital budgeting decisions
1.2 Methods of capital investments appraisal
1.3 Time value of money
1.4 Internal rate of return
1.5 Computational and conceptual difficulties of IRR
1.6 Net present value
Section 2: Making Investment Decision
Introduction
2.1 Ranking and acceptance under IRR and NPV
2.2 Incremental IRR
2.3 Capital rationing and NPV
Section 3: Other Factors Affecting the Investment Decision
Introduction
3.1 Relevant cash flows
3.2 Capital budgeting and taxation
3.3 NPV and purchasing power risk
Section 4: Risk and Probability in Investment Decisions
Introduction
4.1 Uncertainty and investment appraisal
4.2 Concept of expected net present value
4.3 Standard deviation
4.4 Mean variance analysis
4.5 Certainty equivalent approach
4.6 Investment appraisal in practice
Unit 3: Working Capital Management
Section 1: Nature of Working Capital and its Management
Introduction
1.1 Objectives of working capital management
1.2 Structure of working capital
1.3 Accounting concept of working capital
1.4 Liquidity and accounting profitability
1.5 Working capital cycle
1.6 Operating efficiency
1.7 What happens in the real world
Section 2: Credit Management Strategies
Introduction
2.1 Credit management
2.2 Effective credit price
2.3 Effective discount price
2.4 Decision to discount
2.5 Opportunity cost of capital
2.6 Getting the right balance
2.7 Modelling the credit impact
2.8 Alternative credit policies and corporate profitability
2.9 What happens in the real world?
Part Two: The Dividend Decision
Unit 4: Equity Valuation, Stock Market Data and Investment
Section 1: Equity Valuation
Introduction
1.1 Capitalisation of dividends
1.2 Constant dividend valuation model
1.3 Dividend growth and capital gains models
1.4 Split growth in dividends
1.5 Equity value and capital gains
1.6 Estimating the growth rate in dividends
1.7 Earnings valuation models
Section 2: Interpreting Financial Ratios
Introduction
2.1 Dividend yield and PE ratio
2.2 Guide to stock exchange listings
Section 3: Corporate Investment Appraisal
Introduction
3.1 Cost of equity and investment appraisal
3.2 Taxation and the cost of equity
Unit 5: Dividend Decision and Valuation of Corporate Equity
Section 1: The Dividend Decision: Theoretical Considerations
Introduction
1.1 Dividend policy and equity value
1.2 Dividends as a passive residual
1.3 Shareholder preferences
1.4 Dividend irrelevancy hypothesis
1.5 Modigliani-Miller and the law of one price
1.6 Dividend policy under conditions of uncertainty: the Gordon Growth Model revisited
Section 2: Relevance and Reality of Dividend Policy
Introduction
2.1 Dividend policy and growth
2.2 Dividend policy and taxation
2.3 Clientele theory
2.4 Information content of dividend signalling
Part Three: The Finance Decision
Unit 6: Cost of Capital, Corporate Investment and Market Valuation
Section 1: Marketable Securities: Debentures
Introduction
1.1 Cost of debenture capital
1.2 Impact of taxation
1.3 Taxation lags and issue costs
Section 2: Alternative Sources of Finance and Capital Costs
Introduction
Section 3: Weighted Average Cost of Capital
Introduction
3.1 Defining a company's WACC
3.2 Assumptions underpinning WACC
3.3 Problems of estimating WACC in practice
Section 4: Shareholder Wealth and Capital Costs
Introduction
4.1 Shareholder wealth
4.2 MVA, EVA and free cash flow (FCF)
Unit 7: Financial Policy and Capital Structure
Section 1: Capital Structure and Gearing
Introduction
1.1 Capital structure, risk and investor returns
1.2 Capital structure and shareholder return
1.3 Capital gearing and the traditional view
Section 2: Capital Structure and Modigliani-Miller
Introduction
2.1 MM cost of capital hypothesis
2.2 Proposition I and the arbitrage process
2.3 Proposition I and market equilibrium
2.4 Proposition II and market equilibrium
2.5 Proposition III and market equilibrium
Section 3: MM in the Real World
Introduction
3.1 Rising cost of debt in a tax-less world
3.2 MM model, corporate taxation and value
3.3 MM formulation of capital costs with tax
3.4 Increasing costs of debt and bankruptcy in a taxed world
3.5 Personal taxation and the Miller model of general equilibrium
3.6 Brearley and Myers' reconciliation of debt and taxes
3.7 Market imperfection, behavioural theory and optimal
Part Four: The Portfolio Decision
Unit 8: Portfolio Decision and Risk Management
Section 1: Modern Portfolio Theory
Introduction
1.1 Development of modern portfolio theory
1.2 Combined risk of two investments
1.3 Correlation between two investments
1.4 Risk reduction, diversification and the correlation coefficient
Section 2: Minimising Risk: Portfolio Analysis
Introduction
2.1 Minimisation of risk for a two-asset portfolio
2.2 Finding the minimum variance of a two-asset portfolio
2.3 Multi-asset portfolio
2.4 The optimum portfolio
2.5 Significance of covariance terms
Section 3: Portfolio Analysis, Tobin, Risk and CAPM
Introduction
3.1 Market portfolio and Tobin's Separation Theorem
3.2 Systematic and unsystematic risk
3.3 Beta values and systematic risk
3.4 Traditional Capital Asset Pricing Model
3.5 Criticisms of the CAPM
3.6 Arbitrage Pricing Theory
3.7 Capital budgeting and CAPM
3.8 Estimation of project betas
3.9 Capital structure and the beta coefficient
3.10 Capital structure and the CAPM
3.11 Modigliani-Miller and the CAPM
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