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1.1 Preamble
HBUM 218 is a course awarded by the RCU to the Bachelor of Commerce Honours
Degree in Business Management undergraduates. HBUM 218 incorporates the
following
Treasury function.
Evaluation, selection, management and control of investment opportunities.
Raising and management of finance of the organisation.
Need to understand the scope and effects of the financial markets for an entity.
Need to understand the strategic planning process necessary to manage the
financial activities of an institution.
Studying this course would provide the students with an overview of the problems
facing a financial manager in the commercial world. This course will introduce the
students to the concepts and theories of corporate finance that underlie the techniques
that are offered as aids for the understanding, evaluation and resolution of financial
managers problems.

1.2 Aims
This course aims to cover the building blocks of Financial Management that are of
primary concern to corporate managers, and all the considerations needed in order to
make financial decisions both inside and outside firms.

1.3 By the end of this course students should be able to:

Subject-Specific Objectives
Describe how different financial markets work.
Estimate the value of different financial instruments.
Make capital budgeting decisions.
Applying the Capital Asset Pricing Model.
Analyse the Capital Structure Theory and dividend policy of a firm.
Estimate the value of derivatives and advise management on how to use
derivatives in risk management and capital budgeting.
Describe and assess how companies manage working capital and short-term
financing.
Examine the main motives and implications of mergers and acquisitions.

Intellectual Objectives
Integrate subject matter studied on related modules and to demonstrate the
multi-disciplinary aspect of practical financial management problems.
Use academic theory and research to question established financial theories.

Practical objectives
Be more proficient in researching materials on the Internet.
Be able to use Excel for solving various problems.
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1.4 Detailed Outline

Topic 1: Introduction to Financial Management

1.1 The Concepts of Money, Credit and Finance
1.2 Definition of Business Finance
1.3 Types of Finance
1.4 The Concept of Financial Management
1.4.1 Scope of Financial Management
1.4.2 Objectives of Financial Management
1.5 The Agency Problem
1.6 Management of the Agency Problem
1.7 Approaches to Financial Management
1.8 Functions of the Finance Manager
1.9 Importance of Financial Management

Topic 2: Financial System of an Economy

2.1 The Concept of Financial System
2.2 The Components of the Financial System
2.2.1 Financial Institutions
2.2.2 Financial Markets
2.2.3 Financial Instruments
2.2.4 Financial Services
2.2.5 Non-financial Economic Units
2.3 Functions of the Financial System
2.4 Financial System and, Economic Growth and Development

Topic 3: Sources of Finance

3.1 Security Finance
3.2 Equity Shares
3.3 Preference Shares
3.4 Deferred Shares
3.5 No Par Shares
3.6 Creditorship Securities
3.7 Internal Finance
3.8 Loan Financing

Topic 4: Valuation of Financial Assets

4.1 Time Value of Money
4.2 Valuation of Money Market Securities
4.3 Valuation of Bonds
4.4 Valuation of Equity
4.5 Risk and Return of Securities

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Topic 5: Financial Statement Analysis

5.1 Financial Statements

5.2 Possible Framework for Analysis

5.3 Balance Sheet Ratios

5.4 Income Statement Ratios

5.5 Trend and Common-size Analyses

5.6 Working Capital Management

Topic 6: Capital Structure and Cost of Capital

6.1 Meaning of Capital
6.2 Capitalisation of Firms
6.3 Types of Capitalisation
6.4 The Theory of Capital Structure
6.5 Optimum Capital Structure
6.6 Classification of Cost of Capital
6.7 Importance of Cost of Capital
6.8 Computation of Cost of Capital (WACC)
6.9 Implications of WACC to Firm Value
6.10 Factors Affecting Capital Structure

Topic 7: Leverage and Operations of Firms

7.1 The Concept of Leverage
7.2 Operating Leverage
7.3 Financial Leverage
7.4 Differences Between Operating Leverage and Financial Leverage
7.5 EBIT-EPS Break Even Chart for Three Different Financing Alternatives
7.6 Combined Leverage
7.7 Working Capital Leverage
7.8 Risk Management
7.8.1 Reasons for Managing Risk

Topic 8: Capital Investment Appraisals

 8.1 The Concept of Capital Investment Appraisal

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8.2 Types of Investment Problems

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8.3 Pros and Cons of Investment Appraisal Techniques
8.4 Non-convectional Cash Flows
8.5 Capital Investment Appraisal techniques
8.5.1 Payback Methods
8.5.2 Net Present Value
8.5.3 Profitability Index
8.5.4 Internal Rate of Return
8.5.5 Accounting Rate of Return

Topic 9: Capital Budgeting and Rationing

9.1 Capital Budgeting
9.2 Capital Gearing and Rationing
9.3 Kinds of Capital Budgeting Decisions
9.4 Methods of Capital Budgeting and Evaluation
9.5 Risk and Uncertainty in Capital Budgeting
9.6 Certainty Equivalence
9.7 Sensitivity Analysis

Topic 10: Dividend Decisions of Firms

10.1 Types of Dividend
10.2 Dividend Decision
10.3 Irrelevance of Dividend
10.4 Modiglian and Millers Approach
10.5 Relevance of Dividend
10.6 Factors Determining Dividend Policy
10.7 Types of Dividend Policy

Topic 11: Mergers and Acquisitions

12.1 Theory and Motives of Mergers and Acquisitions
12.2 Determinants of Merger Value
12.3 Defensive Tactics Against Merger Threats
12.4 Evaluating Mergers

1.5 Class Participation

Students are heavily encouraged to attend lectures and to participate during lectures.
Constructive academic discussions are expected to be conducted by students. Class
participation would be improved by coming for lectures well-prepared on a regular
basis.

1.6 Contact Information

 Students can get in touch with the lecturer on the cell number and email address given

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above. It is highly recommended that students should make appointments during

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working hours as far as consultations are concerned.

1.7 Plagiarism, Copying and Cheating

Reformed Church University (RCU) condemns any form of plagiarism, copying and
cheating. Plagiarism (using someones work as though it were your own), copying and
cheating/assisting others to cheat are serious forms of academic misconduct and must
be avoided at all costs. Citing and referencing source material is a crucial aspect of
academic writing. Referencing accurately and consistently is an important part of
ensuring the distinction between the students words and the words and ideas of others
in your assignments. In order to determine the level of plagiarism, upon request
students may be required to submit electronic versions of their work. Computer
packages would be used to review students work for any form of the above-
mentioned academic offences.

The following definitions of undesirable conducts should be considered:

Collusion: Collusion occurs when at least two individuals combine their
efforts in order to deceive the teaching staff as to who is responsible for a
particular piece of work.
Co-operation: Co-operation refers to combined effort to achieve a common
goal and may be permitted in certain circumstances e.g. where a joint study
effort, class presentation or group project forms a part of the overall
assessment.
Plagiarism: Plagiarism refers to the use of someones work as though it where
your own. Work can be plagiarised from many sources which include
textbooks, journal articles, the internet, and other students assignments.

1.8 Methodology
This course demands 48 hours of class contact. Class contact would be in the form of
lectures, tutorials and group discussions. Students are expected to devote additional
hours during the semester to study for this course.

Certain textbook topics would be covered in each lecture. The lecturer in each lecture
goes over the concepts and issues of interest. Continuous interaction between the
lecturer and the students blends tutorial sessions with regular lectures. In tutorial
sessions, the lecturer uses examples to interact with students in order to practice more
quantitative issues. Students would convey their questions to the lecturer during
tutorials.

Students are heavily encouraged to put maximum effort in their studies. The lecturer
is there to provide a structure to assist the students in their studies. Students are
 expected to read widely, to do assignments and to contribute to group discussions in

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their efforts to pass this course.

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1.9 Assessment
Assessment is by coursework and examination.

Coursework
The final coursework mark would be made up of an in-class test, an individual
assignment and a group assignment. A group assignment would be made up of a class
presentation supported by a written paper. Deadlines would be clearly specified in all
coursework questions. Strict housekeeping rules and regulations have to be observed
e.g. no student name shall be included to a group assignment after submission.

Examination
Students would be required to write a 3-hour paper at the end of the semester on the
examination dates to be announced in due course by the Reformed Church University.

1.10 Course Activity and Assessment

The following weighting system would be adopted in order to come up with a
students semester overall course mark:
Coursework 30%
Exam 70%

1.11 Final Mark Allocation

Mark Grade
75 - 100 1
67 74 2.1
60 66 2.2
50 59 3
40 49 Supplementary
39 - 0 Fail

1.12 Assignments

Computer typed answers are encouraged

Times New Roman
Font 12
1.5 Spacing

Individual Assignments:

Question 1:
 Analyse the implications of the Efficient Market Hypothesis (EMH) by Eugene Fama

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(1972) to the Zimbabwean Financial System. (50)

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Question 2:
(i) Explain why a company might decide to engage in corporate restructuring. (10)
(ii) Describe what merger benefits, if any, accrue to acquiring company shareholders
and to selling company shareholders. (10)
(iii) How can companies defend themselves against unwanted takeovers? (10)
(iv) Explain what divestiture is and how it may be accomplished. (10)
(v) Explain the term going private and describe the factors that motivate
management to take a company private. (5)
(vi) Explain what a leveraged buyout is and the risk it entails. (5)

Group Assignments:

Group 1:

Analyse the impact of the dividend policy on the value of the firm. (50)

Group 2:
Explain the following terms with special reference to the placement of shares
(i) Initial Public Offering (IPO)
(ii) Rights Issue
(iii) Private Placement (50)

1.13 References

Brealey, R. A., Myers, S. C., and Marcus, A. J. (2001), Fundamentals of Corporate

Finance (3rd Edition), McGraw-Hill Companies, Boston.
Paramasivan, C., and Subramanian, T. (), Financial Management, New Age
International Publishers, New Delhi.
Van Horne, J. C. (1996), Financial Management and Policy (12 th Edition), Prentice-
Hall, New Jersey.
Van Horne, J. C., and Wachowicz, Jr., J. M. (2001), Fundamentals of Financial
Management (13th Edition), Prentice-Hall Inc., Boston.