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2010/2011  BA-1PFM  Principles of Financial Management

English Title
Principles of Financial Management

Course Information

Language English
Point 7,5 ECTS (225 SAT)
Type Mandatory
Level Bachelor
Duration One Semester
Course Period Spring
Time Table Please see course schedule at e-Campus
Study Board
Study Board for Asian Study Programme
Course Coordinator
Evis Sinani
Main Category of the Course
  • Economics, macro economics and managerial economics
Last updated on 29 maj 2012
Learning Objectives
At the end of the course the students should be able to:

Explain the purposes of the four types of financial statements.
Analyze balance sheet, income statement and the statement of cash flows.
Interpret a firm's financial performance using trend analysis and financial ratio analysis.
Describe the concept of operating leverage and its impact on a firm's earnings.
Perform a break-even analysis.
Explain how forecasting is used in the budgeting process.
Prepare a pro forma income statement, cash budget, and pro forma balance sheet.
Compare various current asset management techniques.
Contrast the various methods of short-term financing.
Recognize the influence of borrowing in foreign markets on a firm’s borrowing costs.
Relate time value to money.
Explain the effects of inflation on cost of capital.
Identify the relationship between a company’s capital structure and marginal cost of capital.
Determine how to minimize a company’s risk.
Assessment Written Exam
Marking Scale 7-step scale
Censorship Internal examiners
Exam Period May/June
Aids Closed Book
Duration 4 Hours
Prerequisites for Attending the Exam
Course Content

This course isan overview of the fundamentals of financial management. Emphasis is placed on techniques used in the development of financial thought and financial decisions. The legal forms of organizations, tools of financial analysis, financial structure of firms, leverage, internal financing mechanisms and tax implications are also discussed.

Part of the course is devoted to accounting and financial statement analysis. Accounting is introduced in terms of the common accounting practices, the income statement, the balance sheet and the statement of cash flows. The financial statement analysis element investigates the public available accounting information, which companies disseminate. The annual report and the financial statements (the income statement, the balance sheet, the statement of cash flow, statement of stockholders equity and the accompanying notes) are taken as a point of departure for various types of analyses and discussion of the financial performance of the company. Focus is placed on key financial ratios analyses, their use and limitations.

The course then proceeds with the introduction of techniques for managing short-term assets of the firm and the associated liabilities. The topics are presented in the context of risk-return analysis. From the perspective of a financial manager a constant choice needs to be made between liquid, low-return assets (perhaps marketable securities) and more profitable, less liquid assets (such as inventory).

The decision on capital outlays is among the most significant a firm will have to make. In introducing decision making on capital expenditure, first the students will be exposed to “time value of money” calculations and then proceed to the fundamentals of valuation of bonds and stocks, emphasizing present value techniques. After careful grounding in valuation practice and theory, the concepts of the cost of capital and capital structure will be examined, covering risk-return analysis in capital budgeting. Finally, the course introduces the role of financial markets as they relate to corporate financial management. Among the issues considered are the sources and uses of funds in the capital markets

Teaching Methods
Mix of lectures, exercises and casework.
Further Information

The course is especially integrated with the ASP courses in Microeconomics and Managerial Economics, as well as the other courses at the 1st, 2nd and 3rd year.


A textbook on financial management to be decided in due course.