Advanced Financial Management and International Finance

ICWA Final : Stage III :: Paper 14: [One paper: Three hours - 100 marks]

Contents . . .


  1. Planning environment — financial objectives, policies on financing, investments and dividends. Financial forecasting, planning and uncertainties, interest rates, inflation, capital gains and losses, exchange control regulation, government credit policies and incentives, statistics on production, price indices, labour, capital market based on published statistical data.

  2. Sources of finance (national) — Medium and long term ; venture capital, seed capital, equity preference, convertible and cumulative preference shares, debentures, convertible debentures, hire purchase, leasing, public deposits and institutional finance Life Insurance Corporation, Unit Trust of India, Industrial Finance Corporation of India, Industrial Credit and Investment Corporation of India, National Industrial Development Corporation, Industrial development Bank of India, Small Scale Industrial Development Bank of India (SIDBI), State Finance Corporation(SFC), Industrial Rehabilitation Bank of India (SIDBI), State Finance corporation(SFC), Industrial Rehabilitation Bank of India (IRBI). Internal sources, retained earnings, provisions etc. Issues in raising fiancé, legal form of organisation, provisions of the companies Act, control of capital issues. Short term sources : Trade credit, factoring, Bill of exchange, Bank loan, Cash credit, overdraft, public deposit, SEBI regulations, Primary and secondary Markets. Sources of finance (international) — raising funds in foreign markets and investments in foreign projects, exchange rate – risk agencies involved and procedures followed in international financial operations – concepts of balance of trade and balance of payment.

  3. Analysis of operating and financial leverages — concept and nature of leverages operating risk and financial risk, operating leverages, financial leverage and combined leverage – concepts, measures and their interpretations. Operating leverage and Cost Volume Profit Analysis – Earning Before Interest and Tax (EBIT) and Earning Per share (EPS), indifference point.
    Capital structure theories and planning — concept of capital structure and its perimeters, financial structure and capital structure – simple and complex ; theories of capital structure – net income approach, net operating income approach, traditional and Miller and Modigliani approaches and their criticism. Factors for capital structure planning ; capital structure trend in private and public sectors in India.
    Cost of capital — its nature and meaning, relevance of cost of capital in financial decisions, computation of specific cost, selection of weight, overall cost and marginal cost of capital, corporate tax and its impact on cost of capital.

  4. Capital Budgeting and impact of time lag in analysis of capital utilisation and viability pay back period, present value and internal rate of return including sensitivity analysis, limitations on capital budgeting. Determination of the Cost of Capital – risk of uncertainty, risk ad return in a ports contexts Capital asset Pricing Model (CAPM), inflation, leasing versus buying, income taxes, benefits of accelerated cost recovery system (higher rate of depreciation), investment credits.
    Working capital management — operating cycle concept, forecasting, working capital requirement, strategies of financing current assets ; working capital and term loans, official regulations; monitoring advance management of different components ; working capital management under inflation, new projects working capital management.
    Financial services — Money market, capital market, functions of bank – lending etc., Merchant banking, leasing, hire purchase, cash purchase and factoring.

  5. Advanced financial analysis and planning — financial statements, financial ratio analysis, fund flow and cash flow analysis, leverages, Cost – Volume – Profit analysis, financial forecasting, inter firm comparison, financial analysis and aspects inflation.
    Dividend and retention policies — formulating dividend policy : factors for consideration, dividend theories – Walter’s model, Gordon’s model, residual theory of dividend, Miller and Modigliani hypothesis. Indian positioning private and public sector in general.
    Financial management in public sector — Management of accounts receivable and inventories in public sector : units, source of fund of public sector units – cost of loans, cost of equity, cost of retained earning and debt equity ratio; evaluation and control of capital expenditure – determination of cash flows and cost – benefit analysis ; pricing policy of public enterprises, project formulation and implementation, social cost benefit analysis.
    Contemporary development — WTO, GATT ; Corporate Governance – UK’s Cadbury, Greenbary and Hampel Committee recommendations, Anti dumping laws, TRIPS, TRIMS, Copyright and patent laws and current developments including SEBI regulations as amended from time to time.

  6. International finance and risk management — Minimisation of political risk, risk of fraud ( i.e. fraud policy statements ), effective recruitment policies and good internal controls especially over procurement and cash ; diversifying risk ; management of interest rate risk including the use of interest rate swaps. Forward rate agreements and interest rate guarantees. Interpretation of interest options using simple graphs to show caps, floors and collars. Transaction, translation and economic risk, interest rate parity, purchasing power parity and the Fisher effects. Foreign Direct Investment, forward contracts and money market hedges. Currency features and options. Currency swaps and internal hedging techniques. Other current International finance Issues.

Recommended Books

  • Mac Millan
    1. Modern Corporate Finance
      • A. C. Shapiro
  • Tata Mc Graw Hill
    1. Financial Management: Theory & practice
      • Prasanna Chandra
    2. International Finance
      • Maurice D. Levi
  • Harvard Business School
    1. Financial Services : Perspective & Challenges
      • S. L. Hayes
  • Macmillan India
    1. International Financial Management
      • Jain, Peyrard & Yadav
  • Prentice Hall of India
    1. Multinational Financial Management
      • A. C. Shapiro

Other Relevant Books

Author Credit : Team Future Accountant

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