AL3: STRATEGIC FINANCIAL MANAGEMENT
The objective of the syllabus is to develop the comprehensive knowledge of application of financial management skills to complex financial decisions an entity faces in the business world.
On successful completion of this exam, the student shall be able to:
- Evaluate and appraise the long term capital investment decisions.
- Determine the valuation of securities i.e. debt and equity and other financial instruments.
- Device and apply pricing strategies.
- Comprehend the working capital requirements and their management.
- Evaluate and advise the management on mergers, demergers, acquisitions and other growth strategies.
- Evaluate and manage treasury and other financial risks.
|Capital investment decisions
|Financial instruments valuations
|Working Capital Management
Capital Investment Decisions
- Apply NPV and IRR methods for evaluation of capital projects and decision making in case of NPV and IRR method conflict.
- Application of adjusted present value.
- Apply Pay back (with inflation) for project appraisal.
- Capital rationing application in single period and multi period.
- Sensitivity and probability analysis.
- Monte Carlo simulation application on investment decisions.
- Specialized decision making scenarios including:
- Limiting factor decisions including application of linear programming model
- Make or buy decisions
- Pricing and transfer pricing decisions
- Application of decision trees.
- Dividend and dividend policy decisions.
Valuation of Financial Instruments
- Calculation of Cost of capital and cost of debt and weighted average cost of capital.
- Capital Asset Pricing Model (CAPM).
- Arbitrage pricing theory.
- Organic and in organic growth of the business organization.
- Describe the risk of over valuation.
- The effect of business finance structuring on valuation.
- Application of Modigliani and Miller theory.
- Assessment of acquisition decisions using book value model, cash flow model and market based model.
- Assessment of entities for financial reorganization.
- Advise on management buy outs and buy ins.
Working Capital Management
- Discuss the criticality of working capital management for the continuation of business organization.
- Inventory management
- Debtors and creditors management including debt factoring, credit policies and financing.
- Cash management including cash budgets and forecasting.
- Describe the importance of risk management in short term and long term.
- Explain the types of risks an entity faces including gamma, delta, rho, theta and vega.
- Explain the operation of derivatives market.
- Hedging techniques including
- Forward contracts
- Futures (interest rate futures
- Swaps (currency and future swaps, interest rat swaps