UNIVERSITY OF NAIROBI SCHOOL OF BUSINESS DEPARTMENT OF FINANCE AND ACCOUNTING COURSE OUTLINE DFI 501: FINANCIAL MANAGEMENT COURSE

FACILITATORS: DR. J.O ADUDA/ MR. RONALD CHOGII COURSE OBJECTIVE The primary objective of the course is to introduce students to the fundamental principles of corporate finance and the role of finance in the success of the business enterprise. The course examines the role of finance in business decision making. It also introduces financial management as an integral part of business management and shows that many business decisions involve some form of financial analysis. Emphasis will be placed on the theories and models of corporate finance and their application in financial decision making by business enterprises. COURSE CONDUCT AND EVALUATION The course will be conducted by way of lectures and class discussions. Students will be evaluated as follows: Assignments Tests (Two) Final Exam TOTAL READING MATERIALS 1) Brealey, R.A, Myers, S.C and Allen, F (2010), Principles of Corporate Finance, 8th Edition, Mc Graw Hill, Irwin. 2) Berk, J, Demarzo, P and Harford J (2009), Fundamentals of Corporate Finance, pearson Prentice Hall 3) Brigham, E.F and Houston, J.F (2004), Fundamentals of Financial Management, 10th Edition, Thomson, South Western 4) Cornett, M, Adair, T and Nofsinger, J (2009), Finnace: Applications and Theory, 1st Edition, McGraw Hill, Irwin 5) Gitman, L.J (2008), Principles of Managerial Finance, 12th Edition, Pearson Education 20% 30 50 100%

6) Keown, A.J, Martin, J.H, Petty, J.W and Scott, D.F (2004), Financial Management, Principles and Applications, 10th Edition, Prentice Hall 7) Pandey, I.M (2005), Financial Management, 9th Edition, Vikas Publishing House 8) Ross, S.A, Westerfield, R.W and Jaffe (2007), Corporate Finance, 9th Edition, McGrawHill/Irwin 9) Van Horne, J.C and Wachowiz, J.M (2008): Fundamentals of Financial Management, Prentice Hall COURSE CONTENT 1. Fundamental Concepts of Corporate Finance Overview of Corporate Finance Nature of Financial Markets Agency Theory Risk and Return 2. Valuation of Securities Time value of Money Valuation concepts and Models Valuation of Bonds Valuation of Preferred Stocks Valuation of Common Stocks 3. Cost of Capital Cost of Debt Cost of Preferred Stock Cost of Retained Earnings Cost of New Common Stock Weighted Average Cost of capital 4. Capital Budgeting Decision Methods Importance of Capital Budgeting Capital Budgeting Decision Rules Comparison of the NPV and IRR Methods The Modified Internal Rate of return Cash Flow Estimation 5. Capital Structure Decisions Business and Financial Risk Operating Leverage Financial Leverage MM Models Trade-off Models Pecking Order Theory

6. Dividend Policy Dividends Vs Capital Gains MM Dividend Policy Irrelevance Bird-in-the-Hand Theory Tax Preference Theory Information Content or Signaling Hypothesis Clientele Effect Dividend Stability Dividend Policies in Practice Stock Dividends and Stock Splits Factors Affecting Dividend Policy 7. Working Capital Management Overview of Working Capital Cash Management Inventory Management Receivables and Credit Policy 8. Financial Planning and Forecasting The Financial Plan Sales Forecasts Financial Statement Forecasting: Percent of Sales Method The Formula Method for Forecasting