Strategic Financial Management

CA : Final
Group I
Paper 2 : Strategic Financial Management
[One paper: Three Hours – 100 marks]

Level of Knowledge :

Advanced knowledge.

Objectives:

To apply financial management theories and techniques for strategic decision making.

Contents:

1.	Financial Policy and Corporate Strategy
	Strategic decision making framework
	Interface of Financial Policy and strategic management
	Balancing financial goals vis-vis sustainable growth.
2.	Project Planning and Capital Budgeting
	Feasibility study
	Cash flow Projections – Impact of taxation, depreciation, inflation and working capital
	Capital Budgeting Decisions - Certainty Equivalent approach, Evaluation of Risky Investment Proposals, Risk and Return analysis, Simulation and decision tree analysis, Sensitivity analysis, Capital Rationing, Adjusted Net Present Value, Replacement decisions, Application of Real Options in capital budgeting, Impact of inflation on capital budgeting decisions
	Preparation of Project Report
	Social cost benefit analysis.
3.	Leasing decision including cross border leasing
4.	Dividend Decisions
	Dividend theories, Determinants of dividend policies.
5.	(a) Indian Capital Market including role of various primary and secondary market institutions (b) Capital Market Instruments Financial derivatives – stock futures, stock options, index futures, index options Option valuation techniques : Binomial model, Black Scholes Option Pricing Model, Greeks – Delta, Gamma, Theta, Rho and Vega Pricing of Futures – Cost of carry model Imbedded derivatives (c) Commodity derivatives (d) OTC derivatives Swaps, Swaptions, Forward Rate Agreements (FRAs), Caps, Floors and Collors.
6	Security Analysis
	Fundamental analysis - Economic analysis, Industry analysis and Company Analysis
	Bond valuation, Price Yield relationship, Bond Price forecasting – application of duration and convexity, Yield curve strategies
	Technical Analysis – market cycle model and basic trend identification, different types of charting, support and resistance, price patterns, moving averages, Bollinger Bands, momentum analysis.
7.	Portfolio Theory and Asset Pricing
	Efficient Market Theory – Random walk theory ; Markowitz model of risk return optimization
	Capital Asset Pricing Model (CAPM)
	Arbitrage Pricing Theory (APT)
	Sharpe Index Model
	Portfolio Management - Formulation, Monitoring and Evaluation
	Equity Style Management
	Principles and Management of Hedge Funds
	International Portfolio Management.
8.	Financial Services in India
	Investment Banking
	Retail Banking
	On Line Share Trading
	Depository Service.
9.	(a) Mutual Funds: Regulatory framework, formulation, monitoring and evaluation of various schemes of Mutual funds, Money market mutual funds. (b) Exchange Traded Funds.
10.	Money Market operations
11.	(a) Foreign Direct Investment, Foreign Institutional Investment. (b) International Financial Management Raising of capital abroad - American Depository Receipts, Global Depository Receipts, External Commercial Borrowings and Foreign Currency Convertible Bonds International Capital Budgeting International Working Capital Management.
12.	Foreign Exchange Exposure and Risk Management
	Exchange rate determination, Exchange rate forecasting
	Foreign currency market
	Foreign exchange derivatives – Forward, futures, options and swaps
	Management of transaction, translation and economic exposures
	Hedging currency risk.
13.	Mergers, Acquisitions and Restructuring
	Meaning of mergers and acquisition, categories, purposes
	Process of mergers and acquisition – Identification and valuation of the target, acquisition through negotiation, due diligence, post – merger integration
	Legal and regulatory requirements
	Merger and Acquisition agreement
	Reverse merger
	Potential adverse competitive effects of mergers
	Corporate Takeovers: Motivations, Co-insurance effect, Cross-border takeovers, Forms of takeovers, Takeover defenses
	Going Private and Other Control Transactions: Leveraged Buyouts (LBOs), Management Buyouts (MBOs), Spin Offs and Asset Divestitures
	Corporate Restructuring : Refinancing and rescue financing, reorganizations of debtors and creditors, Sale of assets, targeted stock offerings, downsizing and layoff programmes, negotiated wage give-backs, employee buyouts.