• CURRENT EVENTS

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    ICAI - Final Course: Group I


    Paper 2: Strategic Financial Management (One paper – Three hours – 100 marks)

    Contents:
    1. Financial Policy and Corporate Strategy: Strategic decision making framework, Interface of Financial Policy and strategic management, Balancing financial goals vis-à-vis sustainable growth.

    2. Project Planning and Capital Budgeting: Feasibility study, Cash flow Projections – Impact of taxation, depreciation, inflation and working capital, Capital Budgeting Decisions - Certainty Equivalent approach, Evaluation of Risky, Investment Proposals, Risk and Return analysis, Simulation and decision tree analysis, Sensitivity analysis, Capital Rationing, Adjusted Net Present Value, Replacement decisions, Application of Real Options in capital budgeting, Impact of inflation on capital budgeting decisions, Preparation of Project Report, Social cost benefit analysis.

    3. Leasing decision including cross border leasing

    4. Dividend Decisions:  Dividend theories, Determinants of dividend policies.

    5. (a) Indian Capital Market including role of various primary and secondary market institutions
    (b) Capital Market Instruments: Financial derivatives – stock futures, stock options, index futures, index options, Option valuation techniques : Binomial model, Black Scholes Option Pricing Model, Greeks – Delta, Gamma, Theta, Rho and Vega, Pricing of Futures – Cost of carry model, Imbedded derivatives
    (c) Commodity derivatives
    (d) OTC derivatives -Swaps, Swaptions, Forward Rate Agreements (FRAs), Caps, Floors and Collors.

    6. Security Analysis: Fundamental analysis - Economic analysis, Industry analysis and Company Analysis, Bond valuation, Price Yield relationship, Bond Price forecasting – application of duration and convexity, Yield curve strategies

    Technical Analysis – market cycle model and basic trend identification, different types of charting, support and resistance, price patterns, moving averages, Bollinger Bands, momentum analysis.

    7. Portfolio Theory and Asset Pricing: Efficient Market Theory – Random walk theory ; Markowitz model of risk return optimization, Capital Asset Pricing Model (CAPM), Arbitrage Pricing Theory (APT), Sharpe Index Model, Portfolio Management - Formulation, Monitoring and Evaluation, Equity Style Management, Principles and Management of Hedge Funds, International Portfolio Management.

    8. Financial Services in India: Investment Banking, Retail Banking, On Line Share Trading, Depository Service.

    9. (a) Mutual Funds: Regulatory framework, formulation, monitoring and evaluation of various schemes of Mutual funds, Money market mutual funds.
    (b) Exchange Traded Funds.

    10. Money Market operations

    11. (a) Foreign Direct Investment, Foreign Institutional Investment.
    (b) International Financial Management: Raising of capital abroad - American Depository Receipts, Global Depository Receipts, External Commercial Borrowings and Foreign Currency Convertible Bonds, International Capital Budgeting, International Working Capital Management.

    12. Foreign Exchange Exposure and Risk Management: Exchange rate determination, Exchange rate forecasting Foreign currency market, Foreign exchange derivatives – Forward, futures, options and swaps, Management of transaction, translation and economic exposures, Hedging currency risk.

    13. Mergers, Acquisitions and Restructuring: Meaning of mergers and acquisition, categories, purposes, Process of mergers and acquisition – Identification and valuation of the target, acquisition through negotiation, due diligence, post – merger integration, Legal and regulatory requirements, Merger and Acquisition agreement, Reverse merger, Potential adverse competitive effects of mergers, Corporate Takeovers: Motivations, Co-insurance effect, Cross-border takeovers, Forms of takeovers, Takeover defenses Going Private and Other Control Transactions: Leveraged Buyouts (LBOs), Management Buyouts (MBOs), Spin Offs and Asset Divestitures, Corporate Restructuring : Refinancing and rescue financing, reorganizations of debtors and creditors, Sale of assets, targeted stock offerings, downsizing and layoff programmes, negotiated wage give-backs, employee buyouts.

    Sources: Institute of Chartered Accountants of India

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