SEP 2019

INSTITUTE of BUSINESS MANAGEMENT

College of Business Management
Department of Accounting & Finance

Strategic Financial Analysis and Design – FIN601

1. Overall Aims of Course

The aim of this course is to make students learn application of financial management practices to strategic
decisions related to future financial status of enterprises. This course facilitates optimal utilization of
scarce resources in a convergence to maximize the profitability and wealth creation of an enterprise
strategically, with an ambition to grow, sustain and endure dynamic business environment.

Strategic Financial Analysis & Design (SFAD) course is emerged as a contemporary discipline by a
fusion of financial management and strategic management. This field involves a blending of the basic
conceptual frameworks of the two disciplines to provide a strategic approach towards the management of
financial resources of an enterprise. SFM intends to facilitate optimal results in financial implications of
strategic decisions as well as the strategic repercussion of decisions on financial status of the enterprise
over a period of time. Thus, SFAD is an approach to management that relates financial techniques, tools,
and methodologies to strategic decision making to have a long-term futuristic perspective on financial well
being of the firm to facilitate growth, sustenance, and competitive edge consistently.

It is believed that students must have learned in their core financial management courses the basic
concepts of finance and its management. By undertaking SFM course, students will further learn how to
apply these theory/concepts in making strategic decisions in an organization for the competitive financial
position in future.

The focus of the course will be to demonstrate and impart how financial concepts can be applied to
develop strategies and solve problems in the real business world. The course will expound several
analytical methods used to cope with varied problems in financial management, and present information
about the institutions having financial management issues with the help of case studies.

2. Intended learning outcomes of course (ILOs)

a. Knowledge and understanding:

Students should be able to:
  Understand how the financial theory/concepts as well as relevant analytical techniques/tools can be
applied to solve problems and decisions making in practice.
 Make rational judgment by clear interpretations of quantitative results obtained through analysis.
 Appreciate limitations of traditional accounting models in managing the financial affairs of an
organization.

b. Intellectual skills
Students should be able to:
 Acquire in-depth analysis financial affairs of a firm.
 Synthesize information and data.
 Create analytical thinking process to evaluate the financial affair.

c. Professional and practical skills

After completion of the course the students should be able to:
 Comprehend application of topics of financial management in real business world.
 Understand application of financial management practices to strategic decisions related to future
financial position of a firm.
 Take into account an integrated and holistic view of the organization financial affairs.

d. General and transferable skills

Knowledge obtained in the course will:
 enhance understanding of strategic decision making process;
 facilitate result oriented convergence of financial resources; and
 be applied in professional life.

3. Contents:
Session

Topic

1 Overview of Strategic Financial Management

& Besides class and course introductions, sharing of certain discipline/administrative points to be
2 observed/followed by the students; brief introduction of the teaching methodology to be adopted
during this course.
Proficiency test to be taken on basic financial concepts to judge the students’ understanding of core
concepts in financial management.
Sharing of importance of ethics in finance; and guide how to study, analyze and discuss case studies.
Introduction and review of strategic financial management concepts.

Learning outcome:
 Understand the concept of finance & financial management; difference between strategic
financial management and financial management; and what are the roles of finance
managers?
 Describe the benefits of strategic financial management and major decisions to be taken by
finance managers.
 Explain the goals of successful companies and what are the key attributes which lead to this
success.
 Understand as to why maximizing shareholders wealth is being considered as the prime
objective of corporation, and what actions need to be taken by finance manager in pursuance
 of achieving this objective.
 Learn importance of ethics in finance.
 Learn how to study & prepare for discussing the case study.

Pedagogy
1. Input session (students centered)
2. Lecture with discussion
3. Review and evaluation (student centered)

3 Financial Statements and Cash Flows

& Understanding the financial statements with special emphasis on cash flow statement, and
4 differentiating between accounting, economic and cash income. Understanding ‘Why and How’ of the
manipulation of the bottom line. Discuss and solve Instructor’s given mini case (if any) on related topic
in order to refresh application of related basic concepts.
Students to study and prepare themselves for discussion in the class a comprehensive case study on
relevant topic to be given by the instructor in advance.

Learning outcome:
 Reinforce the concepts related to financial statements and reports.
 Differentiate between accounting, economic, and cash income.
 Understand why and how of the manipulation of the bottom line.
 Learn the difference and importance of economic valued addition and market value addition,
and how these values could be calculated, and performance of a firm could be assessed.
Pedagogy
1. Pre-class independent study
2. Input session (students centered)
3. Lecture with discussion followed with some calculation exercises.
4. Students to solve the mini case on relevant topic as part of their assignment.
5. Interactive discussion on comprehensive case studies.
6. Review and evaluation (student centered – through oral/written quiz)

5, Performance Evaluation of Companies

6 Refreshing lecture on use of Ratios as a tool to evaluate the performance; analytical techniques
& applied;
7 limitations of ratio analysis; application of financial analysis and going beyond the numbers, followed
with students attempting to solve instructor given mini case (if any) on related topic.
Students to study and prepare themselves for discussion in the class a comprehensive case study on
relevant topic to be given by the instructor.

Learning outcome:
 Reinforce financial ratio analysis, and its application to evaluate performance of a business
firm.
 Describe what is involved in the financial statement analysis, and how different groups carry
out this analysis with different perspective.
 Explain how ratios are compared with the industry average and/or with high-level
performance.
 Understand how these ratios could be tied together which would help in understanding the
logic behind Du Pont equation/model.
 How these ratio helps in evaluating the trend analysis, and what two different types of
 analysis can be used to undertake this exercise.
 Describe the uses and limitations of ratio analysis.
 What-else needs to be looked beyond numbers while evaluating a firm’s performance.

Pedagogy
1. Pre Class independent study
2. Input session (students centered)
3. Lecture with discussion followed with some calculation exercises.
4. Students to solve the mini case on relevant topic as part of their assignment.
5. Interactive discussion on comprehensive case studies.
6. Review and evaluation (student centered – through oral/written quiz)

8,9 Financial Planning and Forecasting

& Lecture on What, Why, and How of Financial Planning, Development of assumptions, Financial
10 Modeling. Determining internal and sustainable Growth rates and External Financing Requirements.
Discuss and solve Instructor given mini case (if any) on related topic.
Students to study and prepare themselves for discussion in the class a case study on relevant topic to
be
given by the instructor.

Learning outcome:
 Understand basic concept & importance of planning & forecasting.
 Develop forecasted balance sheets and income statements.
 Understand the importance of using probabilistic information in forecasting financial
statements and evaluating a firm’s condition.

Pedagogy
1. Pre Class independent study
2. Input session (students centered – through oral questioning)
3. Lecture with discussion followed with some calculation exercises.
4. Students to solve the mini case on relevant topic as part of their assignment.
5. Interactive discussion on comprehensive case studies.
6. Review and evaluation (student centered – through oral/written quiz)

11 1st Mid Term Exam

12 Working Capital Management

to Refreshing lecture on definition and importance of working capital, working capital policies and their
14 impact on profitability, determining the level of gross investment in current assets and net working
capital, followed with students to solve Instructor given mini case (if any) study.
Students to study and prepare themselves for discussion in the class a comprehensive case study on
relevant topic to be given by the instructor.

Learning outcome:
 Understand the importance of working capital and its management.
 Discuss how to determine the optimal level of current assets.
 Understand the fundamental decision issues in working capital management-and the trade-
offs involved in making these decisions.
 Explain how the financial manager combines the current asset decision with the liability
structure decision.
 Pedagogy
1. Pre Class independent study
2. Input session (students centered – through oral questioning)
3. Lecture with discussion followed with some calculation exercises.
4. Students to solve the mini case on relevant topic as part of their assignment.
5. Interactive discussion on comprehensive case studies.
6. Review and evaluation (student centered – through oral/written quiz)

15 Capital Budgeting for Decision Making

& Lecture on use of Capital Budgeting for decision making. Review of basic concepts, i.e. understanding
16 and calculating the investment appraisal criteria / techniques such Payback period, NPV, IRR, MIRR,
and
BCR. Estimating the relevant cash flow stream for new and replacement projects. Evaluating projects
mutually exclusive projects having unequal lives – two approaches i.e., replacement chain method,
and
equivalent annual annuities (EAA) method.
Case study to be shared for students to prepare for discussion in the next class.

Learning outcome:
 Understand the linkage between corporate strategy and capital budgeting and to take the
financial decisions using various capital budgeting methods.
 Learn cash flow streams and its estimation; also to identify relevant cash flows for
application of capital budgeting evaluation techniques.
 Learn how to develop numbers or develop cash flow forecasts in conformity with certain
principles.
 Learn how to estimate cash flows of a project and identify relevant cash flows for application
of capital budgeting evaluation techniques.
 Understand how to develop cash flows for replacement projects.
 Learn how to evaluate two proposals having unequal life.

Pedagogy
1. Pre Class independent study
2. Input session (students centered – through oral questioning)
3. Lecture with discussion followed with some calculation exercises.
4. Interactive discussion on comprehensive case studies.
5. Review and evaluation (student centered – through oral/written quiz)

17 Risk Analysis in Capital Budgeting

Over view of risk analysis in capital budgeting, sensitivity and scenario analysis, determining sales
level of achieving NPV breakeven.

Learning outcome:
 Learn sources and perspective of risks involved.
 Explain the sensitivity analysis, scenario analysis, break even analysis.
 Understanding & applying different techniques of risk analysis and various approaches to
project selection under risk.

Pedagogy
1. Pre Class independent study
 2. Input session (students centered – through oral questioning)
3. Lecture with discussion followed with some calculation exercises.
4. Review and evaluation (student centered – through oral/written quiz)

18 Capital Structure Decisions

to Preview of capital structure issues; business & financial risk involved; estimating optimal capital
20 structure to maximize firm’s value.
Discuss a given mini case (if any) on related topic to refresh the concepts.
A detailed case study to be shared for students to prepare for discussion in the next class.

Learning outcome:
 Learn the concept of capital structure & target capital structure; and factors that influence
capital structure decisions.
 Differentiate between business risk and financial risk; and operating leverage and financial
leverage; and how these leverage impact the return on investment.
 Determine the optimal capital structure of a firm.

Pedagogy
1. Pre Class independent study
2. Input session (students centered – through oral questioning)
3. Lecture with discussion followed with some calculation exercises.
4. Students to solve the mini case on relevant topic as part of their assignment.
5. Interactive discussion on comprehensive case studies.
6. Review and evaluation (student centered – through oral/written quiz)

21 2nd Mid Term Exam

22 Dividend Distribution / Policy

& Setting target distribution level (residual distribution model); distribution in form of dividends &
23 through
stock repurchases. Discuss & solve a Instructor given mini case on related topic.
A case study to be shared for students to prepare for discussion in the next class.

Learning outcome:
 Understand dividend policy issues.
 Explain establishing dividend policy in practice by setting payout ratio and applying residual
dividend model.
 Describe the factors influencing dividend policy.
 Differentiate among the terms stock dividend, stock splits, and stock repurchases
 Explain how stock repurchases are used to pay out cash to shareholders.

Pedagogy
1. Pre Class independent study
2. Input session (students centered – through oral questioning)
3. Lecture with discussion followed with some calculation exercises.
4. Students to solve the mini case on relevant topic as part of their assignment.
5. Interactive discussion on comprehensive case studies.
6. Review and evaluation (student centered – through oral/written quiz)

24 Mergers & Acquisition

 to Mergers and Acquisitions types, Reasons and Mechanics and Cost and Benefits of a merger,
26 calculating
Exchange Ratio in a merger, Takeovers and Acquisitions, Divestment, Disinvestment and
Privatization.
A detailed case study to be shared for students to prepare for discussion in the next class.

Learning outcome:
 Learn reasons & mechanics of Mergers and Acquisitions.
 Understand Costs & benefits of Merger.
 Explain application of exchange ratios in Mergers.
 Differentiate between takeover and acquisitions.
 Understand difference between divestment, disinvestment and privatization.
 Understand why and how Mergers and Acquisitions are done.

Pedagogy
1. Pre Class independent study
2. Input session (students centered – through oral questioning)
3. Lecture with discussion followed with some calculation exercises.
4. Interactive discussion on comprehensive case studies.
5. Review and evaluation (student centered – through oral/written quiz)

27 Term Assignment Report Presentation

& A relevant topic will be assigned to a group of 2-3 students at an appropriate time, preferably in the 7 th
28 week. Students will be required to choose a business firm and apply that topic on that firm’s financial
data. Alternatively, a comprehensive case study be given to group to study, analyze, and recommend
solutions. Thereafter, students will be required to make a formal presentation of their term report /
assigned case study through multi-media in these sessions.

29 Final Exam
&
30 Students will be tested on their conceptual and applicative grasp of ALL the aspects of financial
management taught. The three hour test should be prepared focusing sharply on the learning outcomes
detailed above in section 2a, 2b and 2c of this curriculum read together with the learning outcomes
identified in each of the significant sessions above.

4. Teaching and learning methods

i) Lectures – Earlier learned theory/concepts of financial management related to each topic will first be
explained through lectures to refresh their memories. Reference points of textbook used will be given to
students for further review and comprehension as well as discussion(s).
ii) Case Study-solving – First, topic related mini cases will be given to students to apply those refreshed
theory/concepts. These mini cases would be attempted in the class to the extent possible and remaining
portion could be completed at home. A comprehensive case study on related topic will be shared for
studying at home, doing its analysis, identifying problem, and recommending possible solutions.
iii) Interactive Discussions – The given case studies will be discussed in the next class through highly
interactive discussions to take place among students and the instructor.

5. Student assessment methods

Student assessment methods

a. Two mid-terms of one (1) hour each OR one mid-term of two (2) hours in session s 17-18, and a final
exam of three (3) hours to assess subject knowledge.
b. Class participation & discussion of mini cases and comprehensive case studies, oral questions and
written quizzes during the class to assess the understanding of the concepts taught in the class.
c. Class assignments to assess their mini cases solving skills.
d. Presentation of given term assignment in the class to assess comprehension of given case studies &
presentation skill.

Rubrics for Marking

SKILLS Advanced Proficient Basic Minimal

Comprehension Always understands Frequently Usually understands Unsatisfactory
and Analysis the key aspects/issues understands the key the key issues in knowledge of key
in financial issues in financial financial management. issues in financial
management. management. Familiar with management.
Accurately Able to interpret financial statements Inadequate
interprets financial financial statements & other relevant understanding of
statements & other & other relevant topics, but sometimes financial statements.
relevant topics, and topics, and faces difficulty in Generally unable to
demonstrates demonstrates good financial analysis analyze financial data
excellent analytical analytical skills due to weak concepts
skills

Planning and Excellent Good understanding Satisfactory Unsatisfactory

Forecasting understanding of the of the financial understanding of the understanding of the
financial planning planning process. Able financial planning financial planning
process. Able to to conduct high level process. Occasionally process. Finds difficulty
conduct financial financial forecasting faces difficulty in in financial forecasting
forecasting using financial forecasting
various techniques
Decision Making Always understands Frequently Usually understands the Rarely understands the
the techniques understands the techniques required to techniques required to
required to take techniques required to take calculated take calculated
calculated investment take calculated investment & financing investment and/or
& financing investment & decisions as financial financing decisions as
decisions as financial financing decisions as managers of an financial managers of
managers of an financial managers of organization an organization
organization an organization
Problem Solving Always finds a Frequently seeks out Usually seeks out other Rarely seeks out other
number of ways to other ways to solve the ways to solve the ways to solve the
solve the problem on problem, and rarely problem, but problem and frequently
own initiative needs support or occasionally needs needs support and
guidance support or guidance guidance
Personal Always demonstrates Frequently Usually demonstrates Rarely demonstrates
Management personal management demonstrates personal personal management personal management
skills, and is eager to management skills skills skills
learn
Team work Always demonstrates Frequently Usually demonstrates Rarely demonstrates
effective teamwork demonstrates effective effective teamwork effective teamwork
skills and often takes teamwork skills and skills, and occasionally skills, and frequently
initiative in a group rarely needs support or needs support or needs support and
setting that exceeds guidance in teamwork guidance guidance. Often wants
required skills activities to work independently
Participation in Always participates Frequently Usually participates in Rarely participates in
case studies in discussion of case participates in case discussion. Attempt to discussion. Solve &
discussion studies. Complete studies discussion in solve some of the cases submit only few cases
solving of all the the class. Solve most & submit it as as assignments.
cases as assignments. of the cases & submit assignments.
assignments.

Assessment methods … to assess Assessment Weight

schedule: week: age
1 Quizzes Understanding of what was taught in the last Few oral / written
(Oral/Written) class and/or to know students advance quizzes, with no 5%
reading & understanding of topic what is to fixed schedule.
be next taught.
2 Participation in class Intellectual and analytical skills; as well as & During each session. 10%
& interactive communication and presentation skills.
discussion on case
studies.
3 Assignments & To solve mini-cases of relevant topics and On each topic 15%
Presentation of case comprehensive case studies. Purpose to completion.
study as term report. assess enhancement & maturity in Presentation of case
understanding of given topic and skill to study in week 10.
apply that knowledge.
4 1st Mid Term test (*) Knowledge and understanding of the topics 6 15%
covered.
5 2nd Mid Term test (*) Knowledge and understanding of the topics 11 15%
covered.
6 Final exam Comprehensive knowledge & skills of the 16 40%
course.
(*) Or Only one Mid-
Term of 2 hours with
30% weightage.
Total: 100%
6. List of references

a. Course Notes:
Mini as well as comprehensive case studies on different topics (provided by the Instructor).

b. Recommended Books:
 Financial Management – Theory & Practice - By Eugene Brigham and Michael Ehahardt –
Latest Edition
 Financial Management – Theory & Practice – By Eugene Brigham & Luios Gepenski
 Fundamentals of Financial Management – By James C. Van Horne & Jhon WachoWics, Jr.
 c. Periodicals, Websites
 Journal of Finance
 Business Recorder
 Investopdia.com

7. Facilities required for teaching and learning

 Classroom PC
 Classroom multimedia and overhead projector.
 Panoramic whiteboard across front class wall along with removable markers.
 Access to a corporation for the term research project.
 Clock on back and front class wall
 Working AC, lights and fans.

_______________________
Head of Department Dean: __________________
Date: ____ /_____ /______ Date: ___ / ____ / _____