PROFESSIONAL PROGRAMME STUDY MATERIAL …

1 PROFESSIONAL PROGRAMME . STUDY MATERIAL . financial . TREASURY AND. FOREX. management . MODULE II - PAPER 3. ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003. tel 011-4534 1000, 4150 4444 fax +91-11-2462 6727. email website THE INSTITUTE OF COMPANY SECRETARIES OF INDIA. TIMING OF HEADQUARTERS. Monday to Friday Office timings to Public dealing timings Without financial transactions to With financial transactions to Phones: 41504444, 45341000. Grams: COMPSEC. Fax: 011-24626727. Website: E-mail: Laser Typesetting by Delhi Computer Services, Dwarka, New Delhi, and Printed at Printers, NOIDA/. (iii). PROFESSIONAL PROGRAMME . financial , TREASURY AND FOREX management . The company secretaries by virtue of their expertise in the corporate laws and procedure are in an eminently suitable position to: (a) present to the Board of Directors the financial , legal and personnel aspects of modernisation, expansion, diversification of the existing projects of new projects.

2 (b) obtain the decision from the Board; and (c) interact effectively with the financial institutions in the process of procuring the finance. The legal aspects of finance are becoming increasingly important and a company secretary is expected to successfully and effectively handle, amongst other things, important aspects such as management of public issues, syndication of loans, obtaining project approvals, raising of finance through public deposits and debentures or bonds etc. All these essentials require expert knowledge of diverse and complex procedures involved. Realising that the services of a company secretary could be of immense use in this important area, it was thought necessary to include this Paper with a view to equip the students with the requisite fundamentals of the financial management . This STUDY has been st updated upto 31 July, 2011. It has been the endeavour to provide a blend of theoretical concepts and practical orientation. Topics, such as, raising finance from financial institutions, dividend policies, etc.

3 Requiring legal expertise and procedural knowledge have been written with a legal bias. Topics such as, project appraisal, financial planning, portfolio management and securities analysis, working capital management and capital budgeting decisions, treasury management , forex management , commodity exchange and derivatives have been written keeping in view the financial management principles and the practical utility. STUDY lesson on practical problems and case studies is also included to provide the under standing of practical life situations to the student. Though efforts have been made to provide a self-contained STUDY MATERIAL yet it may require regular supplementation as the subject is of a dynamic and fast changing nature. Students are advised to update their STUDY MATERIAL continuously by reading economic dailies, financial magazines and journal and other relevant literature including reference and suggested readings on the subject. Students are expected to learn the art of applying the principles of financial management to real business situations and for this case studies in the area of finance would prove to be of immense use.

4 Although care has been taken in publishing this STUDY MATERIAL , yet the possibility of errors, omissions and/or discrepancies cannot be ruled out. This publication is released with an understanding that the Institute shall not be responsible for any errors, omissions and/or discrepancies or any action taken in that behalf. Should there be any discrepancy, error or omission noted in the STUDY MATERIAL , the Institute shall be obliged if the same are brought to its notice for issue of corrigendum in the Student Company Secretary. (iv). PROFESSIONAL PROGRAMME . MODULE II - PAPER 3. SYLLABUS. FOR. financial , TREASURY AND FOREX management . Level of knowledge : Expert knowledge. Objectives : (i) To provide conceptual clarity about the management tools and techniques used in financial planning, analysis, control and decision making. (ii) To provide knowledge of derivatives, forex and treasury management to enable the candidates to tackle practical situation with ease. Detailed contents : 1.

5 Nature and Scope of financial management Nature, significance, objectives and scope of financial management ; risk-return and value of the firm; financial distress and insolvency; financial sector reforms and their impact on financial management ; functions of finance executive in an organisation; financial management recent developments. 2. Capital Budgeting Decisions Planning and control of capital expenditure; capital budgeting process;. techniques of capital budgeting- discounted and non-discounted cash flow methods, choice of methods; capital rationing; risk evaluation and sensitivity analysis, simulation for risk evaluation; linear programming and capital budgeting decisions. 3. Capital Structure Decisions Meaning and significance of capital structure; capital structure vis-a-vis financial structure; capital structure planning and designing; optimal capital structure;. determinants of capital structure; capital structure and valuation - theoretical analysis; EBIT EPS analysis; cost of capital; factors affecting cost of capital, measurement of cost of capital, weighted average cost of capital, marginal cost of capital; risk and leverage; measures of leverage, leverage effects on shareholders returns.

6 4. Sources of Finance Equity, non-voting preference shares; debentures and bonds; company deposits; term loans from financial institutions and banks; international finance and syndication of loans; euro-issues and external commercial borrowings;. FCCB; internal funds as a source of finance; dividend policy and retention of profits; bonus shares; deferred payment arrangements; corporate taxation and its impact on corporate financing; financing cost escalation. (v). 5. Dividend Policy Introduction; types, determinants and constraints of dividend policy; different dividend theories Walter's Model, Gordon's Model and Modigliani-Miller Hypothesis of dividend irrelevance; forms of dividend; dividend policy - practical considerations and legal constraints; corporate dividend practices in India;. statutory framework. 6. Working Capital management and Control Working capital - meaning, types, determinants; assessment of working capital requirements - operating cycle concept and applications of quantitative techniques; management of working capital - cash, receivables, inventories.

7 Financing of working capital; banking norms and macro aspects of working capital management . 7. Security Analysis and Portfolio management Security analysis - fundamental approach, technical approach and efficient capital market theory; portfolio management - meaning, objectives; portfolio theory traditional approach; modern approach - CAPM model. 8. financial Services Meaning, significance and scope of financial services; types of financial services merchant banking, leasing and hire purchase, venture capital, mutual funds, factoring and forfeiting, securitisation of debt, loan syndication, custodial and corporate advisory services, credit rating. 9. Project Planning and Control Project Planning and preparation of project report; project appraisal under normal, inflationary and deflationary conditions; project appraisal by financial institutions lending policies and appraisal norms by financial institutions and banks; loan documentation and loan syndication, project review and control.

8 Social cost and benefit analysis of project. 10. Derivatives and Commodity Exchanges Concept of derivatives; Characteristics of derivatives; participants in derivative markets; types of derivatives; equity derivatives; forex derivatives; interest rate derivatives; credit derivatives; financial derivatives; Index based derivatives and security based derivatives; derivatives and exposure management , currency forwards, currency futures, currency options and currency swaps and interest rate risk management ; derivative markets in India; MCX-SX; United Stock Exchange; commodity exchanges in India. 11. Treasury management Meaning, objectives, significance, functions and scope of treasury management ;. relationship between treasury management and financial management ; role and responsibilities of chief finance executive; tools of treasury management ; internal treasury controls; environment for treasury management ; role of information technology in treasury management ; liquidity management , regulation, supervision and control of treasury operations, implications of treasury on international banking.

9 (vi). 12. Forex management Nature, significance and scope of forex management ; foreign exchange market and its structure; foreign exchange rates and its determination; exchange rate quotes; types of exchange rates; forex trading; currency futures and options;. foreign exchange risk exposures and their management ; exchange rate forecasting; risk in foreign exchange business. 13. Practical Problems and Case Studies. (vii). LIST OF RECOMMENDED BOOKS. financial , TREASURY AND FOREX management . Readings: 1. Khan & Jain : financial management Text and Problems;. Tata McGraw Hill Publishing Co. Ltd., New Delhi. 2. Prasanna Chandra : financial management Theory & Practice;. Tata McGraw Hill Publishing Co. Ltd., New Delhi. 3. Pandey : financial management (2005); Vikas Publishing House Pvt. Ltd., New Delhi. 4. Rustagi : financial management Theory, Concepts and Problems; Galgotia Publishing Co., Karol Bagh, New Delhi. 5. Maheshwari : financial management Principles &. Practice; Sultan Chand & Sons, Darya Ganj, New Delhi.

10 6. Kuchhal : financial management (Sixteenth Edition);. Chaitanya Publishing House, Allahabad. 7. Vanhorne : financial management Prentice Hall of India (P) Ltd., New Delhi. 8. Sabir Kumar Banerjee : financial management ; & Co. Ltd., New Delhi. 9. Verma : A Manual of Merchant Banking (Practice and Procedures); Bharat Law House, New Delhi. 10. Scott L. William : Contemporary financial Markets and Services; West Publishing Company, St. Paul (USA). 11. Bhalla : financial management and Policy; Anmol Publications Pvt. Ltd., Darya Ganj, New Delhi-110002. 12. John C. Hull : Options, Futures and other Derivative Securities; Prentice-Hall, Inc., Engleword Cliffds, USA. 13. Avadhani : Treasury management in India; Himalaya Publishing House. 14. Hudson Robert : Treasury management ; Blackwell, 108, Cowley Road, Oxford, (viii). 15. Bhalla : Working Capital management ; Anmol Publication Pvt. Limited, 4374/4B, Ansari Road, Daryaganj, New Delhi. 16. Rustagi : Strategic financial management ; Sultan Chand & Sons, 23, Daryaganj, New Delhi.