Principles of Finance

Course Code: BBA 213

Credit Hour: 3

Course Group: Core Courses

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Introduction: Conceptual framework, Financial Decision making. Major Financial Decisions, Role of Finance in a firm. Goal of financial management of a firm, Finance as a discipline/Principles of Finance, Types of Finance.

Short Term Financing: Characteristics and sources, Spontaneous sources, Unsecured and secured short term loan, Assignment and factoring of accounts receivables and inventory financing, Open market Loans.

Intermediate Term Financing: Characteristics and sources, Types, Repayment methods and Effective interest calculation.

Long Term Financing: Characteristics, Uses, Types, Sources, Instruments- Bond: Types, Features; Preferred Stock and Common Stock- Features, Rights & Obligations.

Cost of Capital: Concept, Use, Measuring Component cost of Capital and weighted average Cost of Capital (W ACC), Concept of Marginal Cost of Capital.

Time value of Money: Basic concepts, Computing Present value and Future value: Single Amounts-AnnuitiesMixed streams.

Capital Budgeting: The Capital Budgeting Decision Process-The relevant cash flows, Finding initial investment. Operating cash inflows. Terminal cash flows. Capital Budgeting Techniques-Traditional Approach. Discounted Cash flow Approach- Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI).

Capital Structure Decision: The firm's capital structure-The EBIT-EPS approach to capital structure, Choosing the Optimal Capital Structure, Leverage: Operating and Financial.

Risk and Return: Risk and Return fundamentals, measuring risk: Probability distribution, Expected value, Standard deviation and co-efficient of variation. Risk premium, Risk and required rate of return. CAPM. Leverage and RiskFinancial Risk, Business Risk.

Valuation of Securities: Concept, Valuation of Debt Instruments-Bond Valuation and Yields, Zero-coupon BondConcept and Valuation, Valuation of Equities-Common Stock.

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Book Recommended:

1. Gitman Lawrence J. Principles of Managerial Finance, l0th edition

Reference Book:

1. Brigham Eugene F, Ehrhardt Michael C, Financial Management Theory and Practice,11th edition, SouthWestern 2. Lawrence D, Schall & Charls W. Haley Introduction to Financial Management