ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Business Administration)

WARNING

1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE.
2. SUBMITTING ASSIGNMENT(S) BORROWED OR STOLEN FROM OTHER(S) AS ONE’S OWN WILL BE PENALIZED AS DEFINED IN “AIOU PLAGIARISM POLICY”.

Course: Financial Management (8422, 5040) Semester: Spring, 2025

Level: M. Com/BBA)

Total Marks:100 Pass Marks: 50

ASSIGNMENT No. 1

Q. 1 Define financial management and explain its key functions, highlighting their importance in achieving the goals of a firm.

A company’s net income is $120,000, and its total equity is $800,000. Calculate the return on equity (ROE) and explain its significance in financial decision-making. (20)

Q. 2 Discuss the importance of financial statement analysis and explain how trend analysis and common-size analysis can aid in decision-making.

From the following data, calculate the current ratio and debt-to-equity ratio:

• Current Assets: $100,000
• Current Liabilities: $60,000
• Total Debt: $120,000
• Total Equity: $180,000. (20)

Q. 3 Explain the concepts of simple and compound interest, providing examples of their application in financial decision-making.

A loan of $50,000 is amortized over 10 years with an annual interest rate of 8%. Calculate the annual payment using the amortization formula. (20)

Q. 4 Discuss the concept of rates of return (or yields) and explain their importance in evaluating long-term securities.

A preferred stock pays an annual dividend of $5, and the required rate of return is 8%. Calculate the value of the preferred stock. (20)

Q. 5 Define risk and return and discuss their relationship in the context of portfolio theory.

A portfolio consists of two assets:

• Asset A: Expected return = 12%,

Portfolio weight = 40%,

Standard deviation = 10%

• Asset B: Expected return = 8%,

Portfolio weight = 60%,

Standard deviation = 6%

The correlation coefficient between the two assets is 0.3. Calculate the expected return and portfolio standard deviation. (20)

ASSIGNMENT No. 2

Total Marks: 100 Pass Marks: 50

This assignment is a research-oriented activity. You are required to prepare a detailed report of about 3000 words on the topic allotted to you to be submitted to your teacher for evaluation.

You are required to select one of the following topics according to the last digit of your registration number. For example, if your registration number is 18-IDM-3427183 then you will select topic # 3(the last digit): -

List of Topics:

1. Inclusive Finance: Bridging the Gap for Small and Medium Enterprises (SMEs)
2. Evolving Trends in Venture Capital: Navigating the Startup Financing Landscape
3. Big Data Analytics in Business Finance: Leveraging Data for Strategic Insights
4. Financial Inclusion and Access to Capital: Global Perspectives
5. E-commerce and Business Finance: Funding Strategies for Online Ventures
6. Regulatory Changes in Business Finance: Compliance Challenges & Opportunities
7. The Gig Economy and Personal Finance: Managing Income and Expenses
8. Corporate Social Responsibility (CSR) Reporting: Impact on Financial Decision-Making
9. Real Options Analysis: Incorporating Flexibility into Capital Budgeting
10. The Role of Central Banks in Shaping Business Finance Policies

GUIDELINES FOR THE PREPARATION OF ASSIGNMENT # 2

• 1.5 line spacing
• Use headers and subheads throughout all sections
• Organization of ideas
• Writing skills (spelling, grammar, punctuation)
• Professionalism (readability and general appearance)
• Do more than repeat the text
• Express a point of view and defend it.

FINANCIAL MANAGEMENT (8422,8513,5040,5042,9521)

Unit 1: Introduction to Financial Management

1.1 The Role of Financial Management

1.1.1 Defining Financial Management

1.1.2 Goals of firm

1.1.3 Functions of Financial Management

1.1.4 Corporate Social Responsibility (CSR)

1.2 The Business, Tax and Financial Environments

1.2.1 Business environment

1.2.2 Tax environment

1.2.3 Financial environment

Unit 2: Tools of Financial Analysis and Planning

2.1 Financial Statement Analysis

• • 1. Financial statements
    2. Balance sheet ratios
    3. Income statement and income statement/balance sheet ratios
    4. Trend analysis
    5. Common-size and index analysis

• • 1. Accounting statement of cash flows
    2. Cash-Flow forecasting
    3. Range of cash-flow estimates
    4. Forecasting financial statements

Unit 3: Time Value of Money

3.1 Time Value of Money

• • 1. Simple and compound interest
    2. Annuities
    3. Compounding more than once a year
    4. Amortizing a loan

Unit 4: Time Value of Money

Valuation of Long-Term Securities

4.1 Distinctions among valuation concepts

4.2 Bond valuation

4.3 Preferred stock valuation

4.4 Common stock valuation

4.4 Rates of return (or Yields)

Unit 5: Risk and Return

5.1 Defining Risk and Return

5.2 Using Probability Distribution to Measure Risk

5.3 Attitudes Toward Risk

5.4 Risk and Return in a Portfolio Context

5.5 Diversification

5.6 Capital Asset Pricing Model (CAPM)

5.6 Arbitrage P: ricing Theory (APT)

Unit 6: Working Capital Management-I

6.1 Overview of Working Capital Management

6.1.1 Working capital

6.1.2 Financing current assets: Short-term and long-term mix

6.1.3 Optimal Mix

6.1.4 Uncertainty and the margin of safety

6.1.5 Motives for holding cash

6.1.6 Balancing Risk and Profitability

Unit 7: Working Capital Management-II

Accounts Receivable Management

Credit Standards

Inventory Management

ABC Costing Method

Economic Order Quantity

Unit 8: Investment in Capital Assets

8.1 Overview of Capital Budgeting Process

8.2 Estimating Project “After-Tex Incremental Operating Cash Flows”

8.3 Capital Budgeting Process

8.4 Capital Budgeting Techniques

Unit 9: Cost of Capital

9.1 the Cost of Capital

9.2 Weighted Average Cost of Capital (WACC)

9.3 Operating Leverage, Financial Leverage, and Total Leverage

9.4 Cash-Flow Ability to Service Debt

9.5 Dividend policy

9.6 Stock Dividend and Stock Splits

Recommended Books:

Horne, J. C. V. & Wachowicz, J. R. (2005). Fundamentals of Financial Management (12^th ed.) U.S.A.: Pearson Education Ltd.

Khan, M. Y. & Jains, P. K. (2007). Financial Management (2^nd ed.) New Delhi, India: Tata McGraw-Hill/Irwin.

Brigham, E. F. & Ehrhardt, M. C. (2001). Financial Management (10^th ed.) Ohio, U.S.A.: South-Western Pub.

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