CS PROFESSIONAL - FINANCIAL, TREASURY AND FOREX MANAGEMENT

MODULE 2 PAPER 5:

FINANCIAL, TREASURY AND FOREX MANAGEMENT

In the present corporate world, the funds flow in and flow out from different sources. So as key managerial person, a company secretary supposed to have a thorough knowledge of compliance issues related.

The company secretaries by virtue of their expertise in the corporate laws and procedure are in eminently suitable position to:

(a)Present to the Board of Directors, the financial, legal and personnel aspects of modernisation, expansion, diversification of the existing projects of new projects;

(b) Obtain the decision from the Board; and

(c) Interact effectively with the financial institutions in the process of procuring the finance.

The legal aspects of finance are becoming increasingly important and a Company Secretary is expected to successfully and effectively handle, amongst other things, important aspects such as management of public issues, syndication of loans, obtaining project approvals, raising of finance through public deposits and debentures or bonds etc. All these essentials require expert knowledge of diverse and complex procedures involved.

Topics, such as, raising finance from financial institutions, dividend policies, etc. requiring legal expertise and procedural knowledge have been written with a legal bias. Topics such as, project appraisal, financial planning, portfolio management and securities analysis, working capital management and capital budgeting decisions, treasury management, forex management, commodity exchange and derivatives have been written keeping in view the financial management principles and the practical utility. Ample number of practical problems and case studies are incorporated in this paper to give practical experience to the students.

Nature and Scope of Financial Management

1. Nature, Significance, Objectives and Scope (Traditional, Modern and Transitional Approach)

2. Risk-Return and Value of the Firm

3. Financial Distress and Insolvency

4. Financial Sector Reforms and their Impact

5. Functions of Finance Executive in an Organisation

Capital Budgeting

1. Time Value of Money

2. Planning and Control of Capital Expenditure

3. Capital Budgeting Process

4. Techniques of Capital Budgeting- Discounted and Non-discounted Cash Flow Methods, Choice of Methods

5. Capital Rationing; Risk Evaluation and Sensitivity Analysis, Simulation for Risk Evaluation

6. Linear Programming and Capital Budgeting Decisions – under Constraints and with Multiple Objectives using Mathematical Programming Models, Inflation, Uncertainty and Evaluation using Statistical Decision Theory

7. Analysis of Capital Budgeting Decisions- Some Case Studies

Capital Structure

1. Meaning and Significance

2. Capital Structure vis-à-vis Financial Structure; Planning and Designing; Optimal Capital Structure

3. Determinants of Capital Structure; Capital Structure and Valuation – Theoretical Analysis

4. EBIT – EPS Analysis, EBITDA Analysis (Earning before Interest, Tax, Depreciation and Amortization)

5. Risk and Leverage; Measures of Operating and Financial Leverage, Effects of Leverage on Shareholders’ Returns

Cost of Capital

1. Meaning; Factors Affecting Cost of Capital

2. Measurement of Cost of Capital, Weighted Average Cost of Capital, Marginal Cost of Capital

Financial Services

1. Meaning, Significance, Scope and Structure of Financial Services

2. Types of Financial Services- Merchant Banking, Securitization of Debt, Loan Syndication, Housing Finance, Custodial and Advisory

Project Finance

1. Project Planning – Preparation of Project Report

2. Project Appraisal under Normal, Inflationary and Deflationary Conditions

3. Project Appraisal by Financial Institutions – Lending Policies and Appraisal Norms by Financial Institutions and Banks; Loan Documentation, Project Review and Control; Social Cost and Benefit Analysis of Project. (UNIDO Approach), Term Loans from Financial Institutions and Banks; Lease and Hire Purchase Finance; Venture Capital Funds; Private Equity; International Finance and Syndication of Loans, Deferred Payment Arrangements; Corporate Taxation and its Impact on Corporate Financing

4. Financing Cost Escalation

Dividend Policy

1. Introduction; Types, Determinants and Constraints of Dividend Policy

2. Forms of Dividend

3. Different Dividend Theories – Walter’s Model, Gordon’s Model and Modigliani-Miller Hypothesis of Dividend Irrelevance

4. Dividend Policy – Practical and Legal Constraints

5. Corporate Dividend Practices in India

Working Capital

1. Meaning, Types, Determinants and Assessment of Working Capital Requirements, Negative Working Capital

2. Operating Cycle Concept and Applications of Quantitative Techniques

3. Management of Working Capital – Cash, Receivables, Inventories; Financing of Working Capital; Banking Norms and Macro Aspects

4. Factoring and Forfeiting

Security Analysis and Portfolio Management

1. Security Analysis – Measuring of Systematic and Unsystematic Risk, Fundamental Analysis (Economic, Industry and Company), Technical Approach and Efficient Capital Market Theory

2. Portfolio Management – Meaning, Objectives; Portfolio Theory – Traditional Approach; Fixed and Variable Income Securities, Markowitz Portfolio Theory; Modern Approach – CAPM Model; Economic Value Added, Sharpe Single & Multi Index Model; Arbitrage Pricing Theory (APT); Risk Adjusted Measure of Performance

Derivatives and Commodity Exchanges- An Overview

Treasury Management

1. Meaning, Objectives, Significance, Functions and Scope of Treasury Management

2. Relationship between Treasury Management and Financial Management; Role and Responsibilities of Chief Finance Officer

3. Tools of Treasury Management; Internal Treasury Controls; Environment for Treasury Management

4. Liquidity Management, Regulation, Supervision and Control of Treasury Operations, Implications of Treasury on International Banking

Forex Management

1. Nature, Significance and Scope of Forex Management

2. Foreign Exchange Market and its Structure

3. Foreign Exchange Rates and its Determination

4. Exchange Rate Quotes; Types of Exchange Rates; Forex Trading; Currency Futures and Options

5. Foreign Exchange Risk Exposures and their Management; Exchange Rate Forecasting; Risk in Foreign Exchange Business

Practical Problems and Case Studies