Financial management is concerned with the efficient acquisition and deployment of both short- and long-term financial resources, to ensure the objectives of the company are achieved.
Decisions must be taken in three key areas:
– Investment – both long-term investment in fixed assets and short-term investment in working capital
– Finance – from which sources should funds be raised?
– Dividends – how should cash funds be allocated to shareholders and how will the value of the business be affected by this?
This book discusses the theories, analytical methods, and practical considerations that are helpful in addressing various issues in financial management, a discipline that has assumed great significance in recent times.
The book is designed primarily for students enrolled in Financial Management courses and for managers in business who need a knowledge of financial management to run firms efficiently and make profitable investment decisions.

Introduction

Chapter 1 Introduction to Financial Management
1. Introduction
1.1. Investment decisions
1.2. Financing decisions
1.3. Asset Management decisions
2. The relation between corporate strategy and corporate and financial objectives
2.1. What should be the goal of a firm (from Financial Management point of view)?
2.2. Alternative goals
3. Financial Management and form of business organization
3.1. Sole proprietorships
3.2. Partnerships
3.3. Corporations
4. The “public company model”
4.1. Role of Management in a public company (corporation) and agency theory
4.2. Corporate Social Responsibility
4.3. Corporate Governance
4.4. Board of Directors

Chapter 2 Financial Statement Analysis
1. Financial statements
1.1. Balance sheet (or statement of financial position)
1.2. Income Statement (or Profit and Loss Account)
1.3. Cash Flow Statement
2. Framework for financial analysis
2.1. Financial ratios
2.2. Users, types of comparisons and financial ratios
2.3. Liquidity ratios
2.4. Financial Leverage Ratios
2.5. Coverage Ratios
2.6. Activity Ratios
2.7. The cash operating cycle
2.8. Profitability ratios
2.9. Return on Investment and DuPont Analysis
2.10. Summary of profitability trend analysis
3. Common-size Analysis: balance sheet and income statement
3.1. Index Analyses

Chapter 3 Fund Analysis, Cash-Flow Analysis, And Financial Planning
1. Fund flows analysis
2. Fund flows statement and worksheet
3. Statement of Cash Flows
3.1. Cash Flow from Operating Activities
3.2. Cash Flow from Investing Activities
3.3. Cash Flow from Financing Activities
4. Methods to prepare a Cash Flow Statement
5. Objective of the cash flow statement
6. Cash flows ratios
7. Financial planning

Chapter 4 Working Capital Management
1. Working capital concepts
1.1. Working Capital Management, Why?
1.2. Issues in Working Capital Management
2. Working capital components
2.1. Classification of Working Capital with respect to time
3. Financing Current Assets
4. Financing Methods

Chapter 5 Account Receivables & Inventory Management
1. Introduction
2. Quality of Trade Account
3. Length of Credit Period
4. Opportunity of Cash discount
5. Seasonal dating
6. Default Risk and Bad-Debt Losses
7. Collection Policy and Procedures
7.1. Analyzing the Credit Applicant
7.2. Sequential Investigation Process
7.3. Credit Scoring system
7.4. Other Credit decision Issues
8. Inventory Management and Control
8.1. Why a firm needs inventories?
8.2. How much a firm should order?
8.3. The Optimal Quantity to Order
8.4. ABC Method of Inventory Control
8.5. Economic Ordering Quantity Model
8.6. When a firm should order?
8.7. Safety Stock
8.8. Just in Time

Chapter 6 Short-Term Financing
1. The need for finance
2. Types of spontaneous financing
3. Terms of Sale
3.1. Stretching Account Payables
3.2. Advantages of Trade Credit
3.3. Accrued Expenses
4. Types of negotiated financing
4.1. Stand Alone Commercial Paper
4.2. “Bank-Supported” Commercial Paper
4.3. Bankers’ Acceptances
4.4. Unsecured Loans
5. Cost of Borrowing
5.1. Prime rate
5.2. Compensating Balances
5.3. Commitment fees
6. Secured Loans
7. Factoring Accounts Receivable
8. Composition of short-term financing

Chapter 7 Long-Term Debt, Preferred Stock and Common Stock
1. Introduction
2. Types of Long-Term Debt Instruments
2.1. Corporate Bond
2.2. Debenture
2.3. Equipment Trust Certificates
2.4. Asset Securitization
3. Common Stock and its Features
3.1. Common Stock
3.2. Types of Common Stock Value
3.3. Rights of Common Shareholders

Chapter 8 Capital Budgeting Decisions
1. Introduction
1.1. Types of investment decisions
1.2. Investment Evaluation
2. Investment Evaluation Criteria
2.1. Net Present Value (NPV)
2.2. The Internal Rate of Return (IRR)
2.3. NPV profile and IRR
2.4. Profitability Index
2.5. Payback period
2.6. Discounted Payback Period (DPP)
2.7. Accounting Rate of Return Method
2.8. NPV versus IRR
2.9. Multiple IRR issue
2.10. Mutually Exclusive Project case
2.11. Reinvestment Assumption
2.12. NPV versus PI

References

Paolo Pietro Biancone è professore associato di Economia Aziendale presso l’Università di Torino, Dipartimento di Management. Presiede il corso di laurea in Professioni Contabili ed è responsabile dell’Osservatorio sulla Finanza Islamica.
Docente di Organizzazione e Amministrazione dell’Azienda Farmaceutica presso il corso di laurea in Farmacia dell’Università di Torino, è componente del Comitato Scientifico del Master in Farmacia Territoriale “Chiara Colombo”, organizzato dall’Università di Torino con la collaborazione dell’Ordine dei Farmacisti di Torino. Da alcuni anni è anche docente di Financial Management all’Università di Lanzhou (Cina) e alla National Chengchi University di Taipei (Taiwan). Relatore a convegni nazionali e internazionali, è autore di numerose pubblicazioni in materia di bilancio e princìpi contabili internazionali.

Paolo Pietro Biancone, ITP at London Business School, is associate professor of Management at the University of Turin, and Dean of the International Accounting Master Programme. His main field of research, teaching and writing concerns Islamic Finance and Financial Management. Moreover, he practices these disciplines by supporting companies as a public certified accountant and as an independent auditor.