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INTRODUCTION TO SUBJECT
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COMPARISON OF FINANCIAL STATEMENTS
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TIME VALUE OF MONEY
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Discounted Cash Flow, Effective Annual Interest Bond Valuation - introduction
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Features of Bond, Coupon Interest, Face value, Coupon rate, Duration or maturity date
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TERM STRUCTURE OF INTEREST RATES
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COMMON STOCK VALUATION
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Capital Budgeting Definition and Process
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METHODS OF PROJECT EVALUATIONS, Net present value, Weighted Average Cost of Capital
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METHODS OF PROJECT EVALUATIONS 2
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METHODS OF PROJECT EVALUATIONS 3
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ADVANCE EVALUATION METHODS: Sensitivity analysis, Profitability analysis, Break even accounting, Break even - economic
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Economic Break Even, Operating Leverage, Capital Rationing, Hard & Soft Rationing, Single & Multi Period Rationing
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Single period, Multi-period capital rationing, Linear programming
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Risk and Uncertainty, Measuring risk, Variability of return–Historical Return, Variance of return, Standard Deviation
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Portfolio and Diversification, Portfolio and Variance, Risk–Systematic & Unsystematic, Beta – Measure of systematic risk, Aggressive & defensive stocks
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Security Market Line, Capital Asset Pricing Model – CAPM Calculating Over, Under valued stocks
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Cost of Capital & Capital Structure, Components of Capital, Cost of Equity, Estimating g or growth rate, Dividend growth model, Cost of Debt, Bonds, Cost of Preferred Stocks
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Venture Capital, Cost of Debt & Bond, Weighted average cost of debt, Tax and cost of debt, Cost of Loans & Leases, Overall cost of capital – WACC, WACC & Capital Budgeting
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When to use WACC, Pure Play, Capital Structure and Financial Leverage
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Home made leverage, Modigliani & Miller Model, How WACC remains constant, Business & Financial Risk, M & M model with taxes
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Problems associated with high gearing, Bankruptcy costs, Optimal capital structure, Dividend policy
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Dividend and value of firm, Dividend relevance, Residual dividend policy, Financial planning process and control
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Budgeting process, Purpose, functions of budgets, Cash budgets–Preparation & interpretation
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Cash flow statement Direct method Indirect method, Working capital management, Cash and operating cycle
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Working capital management, Risk, Profitability and Liquidity - Working capital policies, Conservative, Aggressive, Moderate
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Classification of working capital, Current Assets Financing – Hedging approach, Short term Vs long term financing
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Overtrading – Indications & remedies, Cash management, Motives for Cash holding, Cash flow problems and remedies, Investing surplus cash
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Miller-Orr Model of cash management, Inventory management, Inventory costs, Economic order quantity, Reorder level, Discounts and EOQ
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Inventory cost – Stock out cost, Economic Order Point, Just in time (JIT), Debtors Management, Credit Control Policy
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Cash discounts, Cost of discount, Shortening average collection period, Credit instrument, Analyzing credit policy, Revenue effect, Cost effect, Cost of debt o Probability of default
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Effects of discounts–Not effecting volume, Extension of credit, Factoring, Management of creditors, Mergers & Acquisitions
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Synergies, Types of mergers, Why mergers fail, Merger process, Acquisition consideration
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Acquisition Consideration, Valuation of shares
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Assets Based Share Valuations, Hybrid Valuation methods, Procedure for public, private takeover
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Corporate Restructuring, Divestment, Purpose of divestment, Buyouts, Types of buyouts, Financial distress
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Sources of financial distress, Effects of financial distress, Reorganization
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Currency Risks, Transaction exposure, Translation exposure, Economic exposure
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Future payment situation – hedging, Currency futures – features, CF – future payment in FCY
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CF–future receipt in FCY, Forward contract vs. currency futures, Interest rate risk, Hedging against interest rate, Forward rate agreements, Decision rule
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Interest rate future, Prices in futures, Hedging–short term interest rate (STIR), Scenario–Borrowing in ST and risk of rising interest, Scenario–deposit and risk of lowering interest rates on deposits, Options and Swaps, Features of opti
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FOREIGN EXCHANGE MARKET’S OPTIONS
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Calculating financial benefit–Interest rate Option, Interest rate caps and floor, Swaps, Interest rate swaps, Currency swaps
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Exchange rate determination, Purchasing power parity theory, PPP model, International fisher effect, Exchange rate system, Fixed, Floating
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FOREIGN INVESTMENT: Motives, International operations, Export, Branch, Subsidiary, Joint venture, Licensing agreements, Political risk
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