FIN
Financial Management
A fourteen-chapter Financial Management course covering the core theory and practice of corporate finance. Each chapter may be viewed or downloaded for personal study, classroom preparation, and professional reference.
- Instructor
- Dr. Abenet Yohannes, Ph.D.
- Institution
- Kuraz Consulting
- Course code
- FIN
- Chapters
- 14 · PDF
The course covers the goals and functions of financial management, the time value of money, investment decisions and capital budgeting, the fundamentals of risk and return, valuation of stocks and bonds, the cost of capital, capital structure and leverage, dividend policy, working capital management, and integrated financial statement analysis. Emphasis is placed on applying financial theory to real investment, financing, operating, and performance-assessment decisions.
Course overview, outcomes and enrolmentCourse materials
Chapters
Each chapter opens as a PDF in a new tab and can be downloaded for personal study and classroom learning.
- Chapter 1
Introduction to Financial Management
Introduces the scope and objectives of financial management: the finance function, shareholder wealth maximization versus profit maximization, the investment, financing and dividend decisions, agency relationships, financial markets and institutions, and the role of the financial manager.
Learning objectives
- Define the finance function and its place in the organizational structure.
- Distinguish wealth maximization from profit maximization as a corporate objective.
- Describe the investment, financing, and dividend decisions and how they interact.
- Explain agency relationships, agency costs, and common control mechanisms.
- Outline the role of financial markets and institutions in raising and pricing capital.
Prerequisites
- Basic understanding of business organization forms.
- Familiarity with the three main financial statements.
After this chapter: You will be able to explain what financial managers do, state the objective of the firm, and identify the decisions that create or destroy shareholder value.
Open or download Chapter 1 (PDF) - Chapter 2
Time Value of Money
Explains why a birr today is worth more than a birr tomorrow: simple and compound interest, present and future value, annuities and perpetuities, uneven cash flows, compounding frequency, effective annual rates, amortization schedules, and applications to loans and investment decisions.
Learning objectives
- Compute present and future values for single amounts and cash-flow streams.
- Value ordinary annuities, annuities due, and perpetuities.
- Adjust for compounding frequency and convert nominal to effective annual rates.
- Build a loan amortization schedule and separate interest from principal.
Prerequisites
- Chapter 1 concepts on the objective of the firm.
- Comfort with exponents, percentages, and simple algebra.
After this chapter: You will be able to place cash flows arising at different dates on a comparable basis and price loans, savings plans, and investment streams correctly.
Open or download Chapter 2 (PDF) - Chapter 3
Investment Decisions and Capital Budgeting
Covers the appraisal of long-term investments: identifying relevant incremental cash flows, payback and discounted payback, net present value, internal and modified internal rate of return, profitability index, capital rationing, mutually exclusive projects, and sensitivity to assumptions.
Learning objectives
- Identify relevant incremental after-tax cash flows and exclude sunk costs.
- Apply payback, discounted payback, NPV, IRR, MIRR, and the profitability index.
- Rank mutually exclusive projects and resolve NPV–IRR conflicts.
- Allocate limited funds under capital rationing and test sensitivity to assumptions.
Prerequisites
- Chapter 2 discounting techniques.
- Basic cost and management accounting concepts.
After this chapter: You will be able to build and defend an investment appraisal that shows whether a proposed project adds value.
Open or download Chapter 3 (PDF) - Chapter 4
Fundamentals of Risk and Return
Explains the relationship between risk and expected return: measuring historical and expected returns, variance and standard deviation, diversification and portfolio risk, systematic versus unsystematic risk, beta, and the Capital Asset Pricing Model and security market line.
Learning objectives
- Measure historical and expected returns and their dispersion.
- Explain how diversification removes unsystematic risk.
- Interpret beta as a measure of systematic risk.
- Estimate a required return using the CAPM and the security market line.
Prerequisites
- Chapter 2 time-value techniques.
- Introductory statistics: mean, variance, standard deviation, correlation.
After this chapter: You will be able to quantify the risk of an asset or portfolio and translate that risk into the return investors should require.
Open or download Chapter 4 (PDF) - Chapter 5
Valuation of Stocks
Covers the valuation of equity securities: features of common and preferred stock, the dividend discount model, zero-growth, constant-growth and multi-stage growth models, required return and growth estimation, free cash flow and relative valuation approaches such as price–earnings multiples.
Learning objectives
- Describe the rights and features of common and preferred shares.
- Value shares using zero-growth, constant-growth, and multi-stage dividend models.
- Estimate growth rates from retention and return on equity.
- Apply free cash flow and price–earnings multiple approaches as cross-checks.
Prerequisites
- Chapter 2 present-value techniques.
- Chapter 4 required-return estimation.
After this chapter: You will be able to estimate the intrinsic value of a share and explain why your valuation differs from the market price.
Open or download Chapter 5 (PDF) - Chapter 6
Valuation of Bonds
Explains debt securities and their pricing: bond features and indentures, coupon and par values, bond pricing as the present value of cash flows, yield to maturity and current yield, premium and discount bonds, interest-rate risk, duration, and credit ratings.
Learning objectives
- Identify the main features and covenants of a bond issue.
- Price a bond as the present value of coupons and principal.
- Compute current yield and yield to maturity and explain premium and discount pricing.
- Assess interest-rate risk using maturity, coupon size, and duration.
Prerequisites
- Chapter 2 annuity and present-value techniques.
- Basic understanding of interest rates and credit risk.
After this chapter: You will be able to price a bond, interpret its yield, and judge how sensitive its value is to a change in market interest rates.
Open or download Chapter 6 (PDF) - Chapter 7
Cost of Capital
Shows how firms determine the required return on invested funds: cost of debt after tax, cost of preferred stock, cost of retained earnings and new equity, capital-structure weights, the weighted average cost of capital, divisional and project-specific discount rates, and flotation costs.
Learning objectives
- Compute the after-tax cost of debt, preferred stock, retained earnings, and new equity.
- Select appropriate market-value capital-structure weights.
- Calculate the weighted average cost of capital and adjust it for flotation costs.
- Set divisional or project-specific discount rates where risk differs from the firm average.
Prerequisites
- Chapters 4 to 6 on required return and security valuation.
- Understanding of corporate taxation of interest.
After this chapter: You will be able to derive a defensible hurdle rate and apply it to appraise investments at the right level of risk.
Open or download Chapter 7 (PDF) - Chapter 8
Capital Structure and Leverage
Examines how the mix of debt and equity affects firm value and risk: operating, financial and total leverage, break-even analysis, EBIT–EPS analysis, Modigliani–Miller propositions with and without taxes, bankruptcy and agency costs, trade-off and pecking-order theories, and target capital structure.
Learning objectives
- Measure operating, financial, and total leverage and locate break-even points.
- Use EBIT–EPS analysis to compare financing alternatives.
- Explain the Modigliani–Miller propositions with and without taxes.
- Apply trade-off and pecking-order reasoning to set a target capital structure.
Prerequisites
- Chapter 7 cost of capital.
- Cost behaviour and contribution-margin analysis.
After this chapter: You will be able to recommend a financing mix and explain its effect on risk, earnings per share, and the cost of capital.
Open or download Chapter 8 (PDF) - Chapter 9
Dividends and Dividend Policy
Covers distributions to shareholders: cash dividends and payment procedures, dividend irrelevance versus bird-in-hand and tax-preference arguments, residual, stable and constant-payout policies, signalling and clientele effects, stock dividends and splits, and share repurchases.
Learning objectives
- Describe dividend payment procedures and key dates.
- Compare irrelevance, bird-in-hand, and tax-preference arguments.
- Apply residual, stable, and constant-payout policies to a set of forecasts.
- Evaluate stock dividends, splits, and share repurchases as alternatives to cash dividends.
Prerequisites
- Chapter 5 share valuation.
- Chapter 8 capital-structure concepts.
After this chapter: You will be able to design a distribution policy that fits the firm's investment plans, cash position, and shareholder expectations.
Open or download Chapter 9 (PDF) - Chapter 10
An Overview of Working Capital Management
Explains the management of short-term assets and liabilities: net working capital, the cash conversion cycle, aggressive versus conservative financing policies, cash and marketable securities, receivables and credit policy, inventory management, and short-term financing sources.
Learning objectives
- Define net working capital and compute the cash conversion cycle.
- Contrast aggressive, moderate, and conservative working-capital policies.
- Match short-term financing sources to short-term asset needs.
- Diagnose liquidity pressure from working-capital ratios and trends.
Prerequisites
- Chapter 1 finance function overview.
- Ability to read a balance sheet and cash-flow statement.
After this chapter: You will be able to assess whether a firm's short-term asset and financing policy supports both liquidity and profitability.
Open or download Chapter 10 (PDF) - Chapter 11
Inventory Management
Covers the financial management of inventory: types and costs of holding stock, ordering and carrying-cost trade-offs, the economic order quantity model, reorder points and safety stock, ABC classification, just-in-time systems, inventory turnover, and the effect of inventory policy on liquidity and profitability.
Learning objectives
- Classify inventory types and the costs of ordering, holding, and stocking out.
- Compute the economic order quantity, reorder point, and safety stock.
- Apply ABC classification and just-in-time principles.
- Link inventory turnover to liquidity and profitability.
Prerequisites
- Chapter 10 working-capital overview.
- Basic inventory costing knowledge.
After this chapter: You will be able to set order quantities and stock levels that minimize total inventory cost without risking stock-outs.
Open or download Chapter 11 (PDF) - Chapter 12
Cash Management
Explains why firms hold cash and how balances are optimized: transaction, precautionary and speculative motives, cash budgeting and forecasting, the cash conversion cycle, collection and disbursement float, the Baumol and Miller–Orr models, marketable securities, and short-term borrowing and investment decisions.
Learning objectives
- Explain the transaction, precautionary, and speculative motives for holding cash.
- Prepare a cash budget and identify surplus and deficit periods.
- Manage collection and disbursement float to shorten the cash cycle.
- Apply the Baumol and Miller–Orr models to set target cash balances.
Prerequisites
- Chapter 10 working-capital overview.
- Chapter 2 time-value techniques for short-term investment decisions.
After this chapter: You will be able to forecast cash, set a target balance, and decide when to borrow short term or invest surplus funds.
Open or download Chapter 12 (PDF) - Chapter 13
Receivables Management
Covers credit and collection policy: credit standards and the five Cs of credit, credit terms and cash discounts, credit analysis and scoring, ageing schedules and days sales outstanding, monitoring and collection procedures, bad-debt control, and evaluating the profitability of changes in credit policy.
Learning objectives
- Set credit standards using the five Cs of credit and credit scoring.
- Design credit terms and cash discounts and cost their effect.
- Monitor receivables with ageing schedules and days sales outstanding.
- Evaluate whether a proposed change in credit policy increases profit.
Prerequisites
- Chapter 10 working-capital overview.
- Chapter 12 cash-cycle concepts.
After this chapter: You will be able to grant credit on terms that grow sales while keeping bad debts and collection periods under control.
Open or download Chapter 13 (PDF) - Chapter 14
Financial Statement Analysis
Introduces the systematic analysis of financial statements to evaluate financial position, operating performance, cash flows, profitability, liquidity, efficiency, solvency, financial risk, and investment value. Learners apply horizontal, trend, vertical, and common-size analysis, calculate key ratios, use the DuPont framework, interpret annual reports and management discussion, and prepare an integrated financial assessment.
Learning objectives
- Explain the purpose of financial-statement analysis and identify its main users and information sources.
- Perform horizontal, trend, vertical, and common-size analysis of financial statements.
- Calculate and interpret profitability, leverage, solvency, efficiency, liquidity, cash-flow, and market-valuation ratios.
- Apply the DuPont and ratio-pyramid approaches to connect operating performance with return on equity.
- Interpret annual reports, management discussion, qualitative evidence, and the limitations of ratio analysis.
- Prepare an integrated assessment of a company's financial condition and performance.
Prerequisites
- Financial statement literacy: income statement, balance sheet, and statement of cash flows.
- Chapters 10–13 working-capital concepts and basic ratio calculations.
- Comfort with percentages, comparisons, and spreadsheet-based analysis.
After this chapter: You will be able to turn published financial statements into an integrated assessment of profitability, liquidity, efficiency, solvency, risk, and investment performance.
Open or download Chapter 14 (PDF)
These teaching materials were prepared by Dr. Abenet Yohannes, Ph.D., for educational purposes. Students may download and use them for personal study and classroom learning.
Materials may be updated periodically; students should use the latest version available on this page. Questions about the course can be sent to abenetyohannes@gmail.com.
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