POST GRADUATE PROGRAMME IN MANAGEMENT (PGP)

AY: 2020-21 TERM: II

TITLE OF THE COURSE: FINANCE - I
CREDITS: 3
Name of the Faculty Faculty Block/ Email Telephone
Room No. Number
Prof. B Hariprasad A-107 kirankumar@iimidr.ac.in 0731-2439519
Prof. K Kiran Kumar C-209 hariprasad@iimidr.ac.in 0731-2439514
Prof. L V Ramana C-108 ramana@iimidr.ac.in 0731-2439573
Prof. Yogesh Maheshwari A-109 maheshwari@iimidr.ac.in 0731-2439521

CONSULTATION TIME FOR STUDENTS:

Name of the Faculty Timing
Prof. B Hariprasad Tuesday & Thursday in between 3:30 to 5:30PM
Prof. K Kiran Kumar Thursday in between 3:30 to 5:30PM
Prof. L V Ramana Thursday in between 3:30 to 5:30PM
Prof. Yogesh Maheshwari Friday in between 3:00 to 5:00PM

COURSE DESCRIPTION:
This foundation course in finance introduces the participants to the basics of financial management
and its environment. Successful management of businesses requires a sound understanding of
some of the decision-making tools, which would be introduced as a part of this course.

COURSE OBJECTIVES:
The course aims at providing the participants with the following:
• an understanding of financial planning and analysis,
• knowledge of working capital decisions,
• basics of risk, return and valuation, and
• Underpinnings of financial instruments and markets.

PEDAGOGY/TEACHING METHOD
The pedagogy would consist of an appropriate mix of lectures, cases and discussions.

TEXTBOOK
Brigham, Eugene F and Ehrhardt, Michael C., Financial Management: Theory and Practice, 14e,
2014, Cengage Learning, New Delhi (referred to as BE in the course outline)
LEARNING OUTCOMES:

EXPECTED LEARNING OUTCOMES AND ASSOCIATED MEASURES

At the end of the course student is expected to accomplish the following learning outcomes.
Alignment of Course Learning Outcomes (CLOs) with the Programme Learning Goals &
Objectives and Assessment of the learning outcomes of the course is presented below:

Program Learning Goals Learning Objectives Assessment Tool(s)

Develop Critical Thinking 1.1 Relate the classroom learning Embedded
with problem/s faced by the question(s) in Quizzes
organisation or measures taken by the and/or ET
organisation to address a problem/s

1.2 Identify the decision problem

along with sources.

1.3 Identifies and presents

appropriate evidence supporting the
analysis of alternatives

1.4 Evolves one’s own perspective or

takes a position / makes judgement

Develop Competence in 3.3 Understands financial Embedded

Quantitative Analysis planning and forecasting methods question(s) in Quizzes
required for making business and/or ET
decisions
EVALUATION:

Individual Component Group Component Weightage

Class Participation 20
Quizzes 40
End Term 40
Total 100%

ACADEMIC DISHONESTY:
IIM Indore believes in Academic honesty. Academic dishonesty or misconduct is cheating that
relates to an academic activity. It is a violation of trust between the Institute and its stakeholders.
Plagiarism, fabrication, deception, cheating and sabotage are examples of unacceptable academic
conduct. Please consult the Programme manual for the section on academic dishonesty.

SCHEDULE OF SESSIONS:

Module I: Introduction to Finance

Module Objective: To introduce participants to finance through a seamless connect from their
first course in accounting

Session 1: Goals and Functions of Finance

Objective: To understand the goals of financial management and its constituent decisions
Readings: BE: Ch. 1 pp. 3 – 13
Article: Alfred Rappaport (2006), Ten Ways to Create Shareholder Value, Harvard
Business Review, September 2006, 2-13.
Session 2: Financial Statements: From Accounting to Finance
Objective: To appreciate the use of financial statements for managerial decisions
Reading: BE: Ch. 2 pp. 51 – 76
Article: Christopher D. Ittner and David F. Larcker (2003), Coming up Short on Non-
financial Performance Measurement, Harvard Business Review, November 2003,
1-9.
Session 3: Financial Planning and Forecasting
Objective: To comprehend the process of financial planning and projecting financial
statements
Reading: 1. BE: Ch. 12 pp. 487 – 511
2. Thomas Piper (2012), Assessing a Company’s Future Financial Health, HBS
No. 9-911-412, Boston, MA: Harvard Business School Publishing
Case: Steven Rogers and Kenneth Cooper (2016), Gilbert Lumber Company, HBS No.
9-315-137, Boston, MA: Harvard Business School Publishing
Module II: Working Capital Management

Module Objective: To provide a comprehensive understanding of the components of the short-

term financing policies of a firm

Sessions 4: Working Capital Planning

Objective: To understand the concepts of operating cycle and cash cycle, and to
comprehend cash budgeting and cash management techniques
Reading: 1. BE: Ch. 16 pp. 631 – 653
2. Andrew R. Jassy, Laurence E. Katz, Kevin Kelly, and Baltej Kochar (1998), Cash
Management Practices in Small Companies, HBS No. 9-699-047, Boston, MA:
Harvard Business School Publishing

Session 5: Managing the Receivables

Objective: To understand the credit policy variables and their impact on the level of
receivables
Reading: BE: Ch. 16 pp. 654 – 662
Case: Multitech Limited

Session 6: Working Capital Management

Objective: To introduce the terms of various sources of short term financing and provide a
comprehensive view on working capital management
Reading: BE: Ch. 16 pp. 662 – 669
Case: Richard Ruback (2003), Dell’s Working Capital, HBS No. 9-201-029, Boston, MA:
Harvard Business School Publishing

Module III: Introduction to Risk, Return and Valuation

Module Objective: To introduce the basic tools that help in valuing financial instruments and to
understand the risk-return relationship amongst various classes of financial instruments

Sessions 7: Time Value of Money

Objective: To familiarise participants with the concepts of discounting and compounding of
various kinds of cash flows that will enable computation of value
Reading: BE: Ch. 4 pp. 133 – 176
Case: Local Bank (Mini Case, BE: pp. 185-186)

Session 8: Bond Valuation

Objective: To be conversant with the process and terms involved in employing time value
of money in valuing a fixed income instrument
Reading: BE: Ch. 5 pp. 187 – 206, 211 – 220
Case: Fixed Income Valuation, HBS No. 9-298-080, Boston, MA: Harvard Business
School Publishing (First two exercises only)

Session 9: Stock Valuation

Objective: To apply the time value of money for valuing a security with variable cash flows
Reading: BE: Ch. 7 pp. 289 – 313
Case: Temp Force Company (Mini Case, BE: pp. 322-323)
 Session 10: Basics of Risk and Return
Objective: To understand the concept of risk, its link with the return on an asset and the
computations involved
Reading: BE: Ch. 6 pp. 235 – 250

Session 11: Introducing Asset Pricing Models

Objective: To understand the basic tenets of the models that are premised on the risk-
return relationship
Reading: BE: Ch. 6 pp. 250 – 265

Module IV: Introduction to Corporate Financing

Module Objective: To enable participants understand the framework in which corporates

operate and access funds

Session 12: Financial System

Objective: To understand the different kinds of markets that firms access for short term
and long term funds
Reading: BE: Ch. 1 pp. 13 – 27

Session 13: Financial Markets

Objective: To understand how corporates undertake issuance of securities
Reading: 1. BE: Ch. 1 pp. 27 – 28, Ch. 18 pp. 729 - 735
2. Money and Capital Markets: Another Option for Funding Growth, Harvard
Business Press Chapters, Product No. 5832BC-PDF-ENG.
Case: Kendall H. Backstrand (1997), Netscape’s Initial Public Offering, HBS No. 9-296-
088, Boston, MA: Harvard Business School Publising

Session 14: Market Efficiency

Objective: To understand the impact of information on the level of efficiency of the market
and some tenets of behavioral finance
Reading: BE: Ch. 6 pp. 265 – 269
Article: 1. Bruce Stangle (2005), Market Efficiency versus Behavioral Finance, Journal of
Applied Corporate Finance, 17(3), 124-134
2. Meir Statman (1999), Behavioral Finance: Past Battles and Future
Engagements, Financial Analysts Journal, 18-27

Session 15: Integrating the Essentials of Finance with the Financial Environment
Objective: To appreciate the need for aligning the finance function to the financial
environment in which the firm operates
Reading: Jose M. Campa (2013), Lessons from the Crisis for Corporate Finance, IESE
Insight, 16, 13-18
Please indicate the changes made in the course outline based on the measurement of assurance
of learning (closing the loop)/student feedback: NIL

Please give the details of the book if students need to buy the book:

Author Title Publisher Edition Remarks, if any

Brigham, Eugene F and Financial Cengage 14e, 2014 referred to as BE
Ehrhardt, Michael C Management: Learning, in the course
Theory and Practice New Delhi outline

Additional Readings:
No additional reading is required for the course.

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