FIN301FUNDAMENTALS OF FINANCIAL MANAGEMENT

Format of Final Exam

Two hour closed-book exam Section 1: 20 multiple-choice questions – 30 marks Section 2: 02 short answer questions – 20 marks Section 3: 03 problem solving questions – 50 marks

Contents covered: Final exam will cover all topics Focus on the following topics:

Chapter 5: Time value of money Chapter 9: Share valuation Chapter 11: Capital budgeting Chapter 13 + Chapter 14: Financing decisions

Body of Knowledge

In order to get a pass in the final exam, students must achieve at least 50/100 marks.

Level of difficulties: 50 – 70 marks: basic understanding over the 13 topics

including key terms in each lecture and required exercises in the tutorials. Thus, the best way to get a satisfactory exam result is to review all lectures and redo all tutorial exercises.

10 – 30 marks: medium questions required analysis and application of theories learned during the semester.

10 – 20 marks: more advanced questions required higher level of analysis and comprehensiveness.

Approximately 40% theory-based and 60% calculation and application based questions

Lectures revision

Topic 1: Introduction to financial management Topic 2: Financial market Topic 3: Financial statement Topic 4: Financial statement analysis Topic 5: Time value of money Topic 6: Interest rates Topic 7: Bonds and their valuation Topic 8: Shares and their valuation Topic 9: Risk and returns: portfolio theory Topic 10: Capital budgeting Topic 11: Capital structure Topic 12: Dividend policy Topic 13: Working capital management

Fundamental

concepts

Financial assets

Corporate actions

What is financial management? Financial management is an area of finance, which focuses on

decisions relating to how much and what types of assets to acquire (capital budgeting, investment), how to raise the capital needed to purchase assets (financing), and how to run the firm so as to maximize its value.

Three decisions that a financial manager has to make with respect to wealth maximization to shareholders include: Investment decision: Chapter 11 – capital budgeting, Chapter 7, 8, and

9 – securities valuation and portfolio management principles.

Financing decision: Chapter 13 – capital structure, Chapter 14 – dividend policy.

Asset management decision: Chapter 15 – working capital management

Decision making tools

Principle: TIME VALUE OF MONEY – Chapter 5

Investment decisions (Ch.11) Project evaluation – capital budgeting

NPV analysis (cost-benefit analysis) IRR Payback and discounted payback

Portfolio construction (Ch.7,8,9) Risk and return relationship - tradeoffs Diversification benefit

Decision making tools

Financing decisions (Ch.13,14) Financing cost: cost of equity capital, cost

of debt, cost of preferred shares, and average weighted cost of capital

What is the optimal capital structure of the firm?

Should the firm pay dividend? If yes, what are methods Cash dividend Stock dividend Other issue: stock split, stock repurchases. Dividend payment model – residual dividend

model

Decision making tools

Asset management (Ch.15) – Working capital management Cash , Account receivable, and Inventory

management Account payable, Notes payable, and

Accruals management

Other factors affecting decisions of a financial manager Knowledge of its business such as type

of firms, agency relationship. Knowledge of financial market in which

the firm is participating in: capital market, money market, etc and how those market work (efficient market?).

Other factors: management capacity, personalities, and so on.

How to evaluate performance of a firm?

This requires a thorough analysis over all aspects of businesses including, but not limited to: Profitability Liquidity Debt management Asset management Valuation ratio

Two approaches: Financial statement analysis Share valuation

Fundamental analysis

Final Notes

Please be aware that we might separate finance concepts or financial decisions in some areas, but, they are closely inter-related to each other.

There might be lots of other different uses of finance knowledge for various purposes. Example: Financial statement analysis is used by a

credit rating agency. This subject has two big goals:

Provide introductory materials of business finance Equip students with basic finance principles such as

time value of money concepts, risk and return concepts, and interest rates.

Feedback

All of your constructive criticisms and comments over the course are highly appreciated.

Our teaching team emails: Nguyen Xuan Truong –

truongnx@hanu.edu.vn Le Thanh Binh – binhlt@hanu.edu.vn Nguyen Thi Van Anh –

ntva1279@gmail.com Nguyen Dinh Du – ndd2107@gmail.com

Financial Management in One Mind Map

To be updated in the final week. Please prepare a mind map of your own!

Section 1: Multiple-choice questions

Sample questionA firm should raise capital according to its

optimal capital structure so as to maximize its ___A. earnings per share (EPS).B. stock price.C. net income.D. weighted average cost of capital (WACC).

Section 2: Short Answer Questions

Sample question:

Discuss (1) the information content hypothesis, (2) the clientele effect, and (3) basing on the information content hypothesis, explain “stock repurchase” action of a company

Section 3: Problem Solving Questions

Sample questions

Keep calm and study for final exam

Good Luck