FIN2602: Financial Management Textbook
Comprehensive Study Guide
Version 2.0
2025
Table of Contents
Preface
Introduction
Chapter 1: Fundamentals of Financial Management
Chapter 2: Time Value of Money
Chapter 3: Risk and Return
Chapter 4: Financial Statements Analysis
Chapter 5: Capital Budgeting
Chapter 6: Cost of Capital
Chapter 7: Working Capital Management
Chapter 8: Dividend Policy
Chapter 9: Mergers and Acquisitions
Case Studies
Glossary
References
Index
Preface
This textbook is designed to provide a comprehensive understanding of financial
management principles. It aims to equip students with the knowledge required to make
sound financial decisions and apply theoretical concepts to practical scenarios.
Introduction
Financial management plays a critical role in the success of organizations. It involves the
planning, organizing, controlling, and monitoring of financial resources to achieve
organizational objectives. This textbook will cover essential topics such as the time value of
money, risk and return, financial statements analysis, and capital budgeting.
Chapter 1: Fundamentals of Financial Management
1.1 Introduction to Financial Management
Detailed explanation of 1.1 Introduction to Financial Management.
1.2 Goals of Financial Management
Detailed explanation of 1.2 Goals of Financial Management.
1.3 Functions of Financial Managers
Detailed explanation of 1.3 Functions of Financial Managers.
1.4 Agency Problems and Corporate Governance
Detailed explanation of 1.4 Agency Problems and Corporate Governance.
Summary
Detailed explanation of Summary.
Review Questions
Detailed explanation of Review Questions.
Chapter 2: Time Value of Money
2.1 Concept of Time Value of Money
Detailed explanation of 2.1 Concept of Time Value of Money.
2.2 Present Value and Future Value
Detailed explanation of 2.2 Present Value and Future Value.
2.3 Annuities and Perpetuities
Detailed explanation of 2.3 Annuities and Perpetuities.
2.4 Loan Amortization
Detailed explanation of 2.4 Loan Amortization.
Summary
Detailed explanation of Summary.
Review Questions
Detailed explanation of Review Questions.
Chapter 3: Risk and Return
3.1 Introduction to Risk and Return
Detailed explanation of 3.1 Introduction to Risk and Return.
3.2 Measuring Risk and Return
Detailed explanation of 3.2 Measuring Risk and Return.
3.3 Portfolio Theory
Detailed explanation of 3.3 Portfolio Theory.
3.4 Capital Asset Pricing Model (CAPM)
Detailed explanation of 3.4 Capital Asset Pricing Model (CAPM).
Summary
Detailed explanation of Summary.
Review Questions
Detailed explanation of Review Questions.
Chapter 4: Financial Statements Analysis
4.1 Overview of Financial Statements
Detailed explanation of 4.1 Overview of Financial Statements.
4.2 Ratio Analysis
Detailed explanation of 4.2 Ratio Analysis.
4.3 Cash Flow Analysis
Detailed explanation of 4.3 Cash Flow Analysis.
4.4 Limitations of Financial Statements
Detailed explanation of 4.4 Limitations of Financial Statements.
Summary
Detailed explanation of Summary.
Review Questions
Detailed explanation of Review Questions.
Chapter 5: Capital Budgeting
5.1 Importance of Capital Budgeting
Detailed explanation of 5.1 Importance of Capital Budgeting.
5.2 Net Present Value (NPV)
Detailed explanation of 5.2 Net Present Value (NPV).
5.3 Internal Rate of Return (IRR)
Detailed explanation of 5.3 Internal Rate of Return (IRR).
5.4 Payback Period
Detailed explanation of 5.4 Payback Period.
Summary
Detailed explanation of Summary.
Review Questions
Detailed explanation of Review Questions.
Chapter 6: Cost of Capital
6.1 Cost of Debt
Detailed explanation of 6.1 Cost of Debt.
6.2 Cost of Equity
Detailed explanation of 6.2 Cost of Equity.
6.3 Weighted Average Cost of Capital (WACC)
Detailed explanation of 6.3 Weighted Average Cost of Capital (WACC).
Summary
Detailed explanation of Summary.
Review Questions
Detailed explanation of Review Questions.
Chapter 7: Working Capital Management
7.1 Introduction to Working Capital
Detailed explanation of 7.1 Introduction to Working Capital.
7.2 Cash Management
Detailed explanation of 7.2 Cash Management.
7.3 Inventory Management
Detailed explanation of 7.3 Inventory Management.
7.4 Receivables Management
Detailed explanation of 7.4 Receivables Management.
Summary
Detailed explanation of Summary.
Review Questions
Detailed explanation of Review Questions.
Chapter 8: Dividend Policy
8.1 Introduction to Dividends
Detailed explanation of 8.1 Introduction to Dividends.
8.2 Dividend Theories
Detailed explanation of 8.2 Dividend Theories.
8.3 Factors Affecting Dividend Policy
Detailed explanation of 8.3 Factors Affecting Dividend Policy.
Summary
Detailed explanation of Summary.
Review Questions
Detailed explanation of Review Questions.
Chapter 9: Mergers and Acquisitions
9.1 Introduction to Mergers and Acquisitions
Detailed explanation of 9.1 Introduction to Mergers and Acquisitions.
9.2 Types of Mergers
Detailed explanation of 9.2 Types of Mergers.
9.3 Valuation Techniques
Detailed explanation of 9.3 Valuation Techniques.
9.4 Regulatory Framework
Detailed explanation of 9.4 Regulatory Framework.
Summary
Detailed explanation of Summary.
Review Questions
Detailed explanation of Review Questions.
Case Studies
Case Study 1: Investment Decision Analysis
Case Study 2: Capital Budgeting in Practice
Case Study 3: Working Capital Management in SMEs
Glossary
Time Value of Money: The principle that money today is worth more than the same amount
in the future.
Net Present Value (NPV): The difference between the present value of cash inflows and the
present value of cash outflows.
References
Ross, S.A., Westerfield, R.W., & Jordan, B.D. (2021). *Fundamentals of Corporate Finance*.
McGraw-Hill Education.
Index
Time Value of Money...............25
Capital Budgeting...............45
Risk and Return...............35
