Universiti Teknologi MARA

SCHEME OF WORK
Course Name: FUNDAMENTAL OF FINANCIAL MANAGEMENT
Course Code: MAF253
Credit Hours: 3
Contact Hours: 3
Lecturers Particulars:
Name: DEBBIE DORA FREEDLINE
Room No: BLOK B, No.342
Contact No: 082-677684/012-8921019
Email: debbiedora@sarawak.uitm.edu.my
Course Objectives
1. To introduce students to various aspects of financial management.
2. To equip students with the relevant knowledge essential in making
financial decisions.
3. To enable students to apply the appropriate techniques in making
financial decisions.
Course Assessment
CONTINUOUS ASSESSMENT:
Quizzes
5%
Test 1 (Common)
10%
Test 2
10%
Assignments
5%
FINAL EXAMINATION
70%
TOTAL
100%
COURSE OUTLINES
Weeks
Topics
Hours
Reference
1
Introduction to Financial Management
1.1 What is Finance?
3
Chapter 1
1.2 Importance of Finance
1.3 Components of Financial Environment
o Financial Managers
o Investors
o Financial Market
o Financial Institutions
1.4 Roles of the financial manager.
1.5 Goal of the Firm:
o Maximizing Profits
o Maximizing Shareholders Wealth
1.6 Legal Forms of Business Organization
2-3

Evaluation of Financial Performance

1 Key Financial Statements
o Income Statements
o Balance Sheet

Chapter 2

o Statement of Retained Earnings

o Cash Flow Statement
2.2 Financial Ratios Analysis
o Liquidity Ratios
o Efficiency Ratios
o Debt Management Ratios
o Profitability Ratios
Market Value Ratios
2.3 Du Pont Analysis
2.4 Types of Ratio Comparisons
o Trend Analysis
o Cross-Sectional Analysis
o Common-size Analysis
Uses and Limitation of Ratio Analysis
4-6

Working Capital Management

3.1 Introduction to Working Capital Management
o Working Capital terminology
o Risk-Return Trade-off
3.2 Strategies in Working Capital Management:
o Matching/ Hedging Principle
o Aggressive Principle
o Conservative Approach
3.3 Cash Conversion Cycle
3.4 Management of Current Assets:
o Cash
o Marketable Securities
o Accounts Receivables
Inventory
3.5 Management of Current Liabilities (Short-term
Financing)
o Sources : Unsecured & Secured Sources
Unsecured : Accruals, Trade Credit, Bank
Loan, Commercial Paper
Secured: Account Receivable Loan &
Inventory Loan
Cost of short-term financing
Time Value of Money
4.1 The concept of time value of money
4.2 Simple Interest and Compound Interest
4.3 Future Value versus Present Value
4.4 Periodic Compounding
4.5 Nominal and Effective Interest Rates
4.6 Annuities
o Ordinary Annuity
o Present Value of Ordinary Annuity
o Future Value of Ordinary Annuity
o Annuity Due

Chapter 4,5,6

Chapter 7

o Present Value of Annuity Due

o Future Value of Annuity Due
4.7 Present Value & Future Value of Uneven Cash
flows
4.8 Present value of Perpetuities
4.9 Loan Amortization
8

9-11

12-13

Risk and Return

5.1 Definition and Measurement of Expected
Return
5.2 Definition and Measurement of Risk
o Variance
o Standard Deviation
o Coefficient Of Variation
5.3 Types of Risk
o Systematic Risk
o Unsystematic Risk
5.4 Risk and Diversification
5.5 Relationship between Risk and Return
Capital Budgeting
6.1 Introduction to Capital Budgeting
6.2 Types of Projects:
o Independent
o Mutually Exclusive Projects
6.3 Types of Capital Budgeting Decision
6.4 Guidelines For Capital Budgeting
6.5 Measuring the Projects Benefits and Costs
(Relevant Cash Flows):
o Initial Outlay
o Annual Cash Flows
o Terminal Cash Flow
6.6 Capital Budgeting Techniques:
o Non-Discounted techniques
o Payback Period
o Discounted Techniques
o Discounted Payback Period
o Net Present Value (NPV)
o Profitability Index
o Internal Rate of Return (IRR)
o Modified Internal Rate of Return
(MIRR)
6.7 Capital Rationing
6.8 Capital Budgeting Under Uncertainty
Cost of Capital
7.1 Definitions and Concepts
7.2 Determining Individual Costs of Capital:

Chapter 8

Chapter 9

Chapter 10

Debt
Preferred Stocks
Retained Earnings
New Common Stocks
Weighted Average Cost of Capital (WACC)
Weighted Marginal Cost of Capital (WMCC)
Break point
Making Investment Decision

o
o
o
7.3
7.4
7.5
7.6
14

Leverage
8.1 Business Risk and Financial Risk
8.2 Break-even Analysis
8.3 Operating Leverage
o Degree of Operating Leverage (DOL)
8.4 Financial Leverage
o Degree of Financial Leverage (DFL)
8.5 Combined Leverage
Degree of Combined Leverage (DCL)

3
Chapter 11

Main Text:
Rodziah Abd Samad, Rohani Abdul Wahab, Sheila Christabel, Mohd. Nizal Haniff, Financial
Management for Beginners, Fourth Edition, 2013, McGraw Hill.
References:
1. Andrew Leong,Sharifah Fadzlon, Tew You Hoo, Corporate Finance, Prentice Hall,2009
2. Petty Keown, Scott and Martin, Financial Management: Principles and Application,
Prentice Hall
3. Brigham, Fundamentals of Financial Management, Dryden Press.
4. Gitman, Introduction to Finance, International Edition, Addison Wesley Longman
Topics/Chapters to be covered in Quizzes and Tests:
Quiz 1: Working capital management (Hedging principle, CCC and CA, management of CL)
Quiz 2: Time value of money
Test 1 (Common) :
o Introduction to Financial Management
o Working Capital Management and short term financing (Hedging, CCC and CA,
management of CL)
Test 2:
o Risk and Return
o Cost of Capital

Assignments:
Assignment 1: Introduction to Financial Management (Discussion questions - theory)
Assignment 2: Working capital management (Discussion question - theory)

Note:
There will be no replacement quiz, test or assignment. If you are absent for a particular
quiz or test/assignment (with acceptable reason), your final grade will be 70% plus the
weight allocated to that particular test or assignment.