Tribhuvan University
Faculty of Management
Office of the Dean
Bachelor of Business Administration in Finance (BBA-F)
Course Description
:This course begins with a brief overview of corporate finance. It covers different aspects of long - term and short-term financing. It also covers leasing, private equity and venture capital financing and warrants and convertibles. Finally, it covers financial distress issues. Learning Outcome On completion of this course the students will be able to: Understand the concept, instruments, markets for corporate financing decision; Evaluate various source of long-term financing; Obtain long-term debt from financial institution; Analyze buy-versus-leasing decision; Compare cost of different sources of short-term financing; Use private equity and venture capital financing; Evaluate warrants and convertibles for raising long-term fund; Understand the concept and remedies of financial distress.
Course Objective
:The purpose of this course is to impart knowledge and analytical skills of corporate finance on raising funds most effectively by business firms. At the completion of this course the students will have a clear understanding of sources of funds used by a corporation, compare cost of different sources short-term fund, analyze the pros and cons of each source of financing, raise capital from the capital market by issuing securities, describe financial distress and distress management techniques. Course Description This course begins with a brief overview of corporate finance. It covers different aspects of long - term and short-term financing. It also covers leasing, private equity and venture capital financing and warrants and convertibles. Finally, it covers financial distress issues. Learning Outcome On completion of this course the students will be able to: Understand the concept, instruments, markets for corporate financing decision; Evaluate various source of long-term financing; Obtain long-term debt from financial institution; Analyze buy-versus-leasing decision; Compare cost of different sources of short-term financing; Use private equity and venture capital financing; Evaluate warrants and convertibles for raising long-term fund; Understand the concept and remedies of financial distress.
Course Contents:
Lecture hours show the approximate classroom time allocated to each unit.
Unit 1. Introduction
- Corporate financing decision: instruments, markets, and financial intermediaries
- Ethics in financing decisions
- Financial innovations and corporate finance
- Capital structure and financial structure
- Capital structure issues.
Unit 2. Long-term Financing
- Features of Bonds, types of bonds, bond innovations, advantages and disadvantages of bond financing
- Key characteristics of preferred stock, merits and demerits of preferred stock financing
- Common stock financing, evaluation of common stock as a source of long-term financing
- Effect of each financing alternative on balance sheet and income statement.
Unit 3. Financing with Term Loan
- Key characteristics of te rm loan, advantages and disadvantages of term loan financing, lenders of term loan, documents required for term loan
- Loan amortization schedules:
- equal installment, equal principal, bullet payment and balloon payment
- Provision of moratorium period
- Security provisions and protective covenants.
Unit 4. Lease Financing
- Lease as a source of financing
- Features of a lease contract
- Types of leases
- Advantages and disadvantages of lease financing
- Accounting and tax treatments of lease s
- Return to the lessor
- Analysis of lease versus buy/ borrow decision.
Unit 5. Short-term Financing
- Short-term versus long -term financing
- Advantages and disadvantages of short -term financing
- Unsecured sources of short -term financi ng: accruals, trade credit, bank loan, commercial papers
- Secured sources of short -term financing: accounts receivable financing (pledging and factoring), inventory financing (floating lien, chattel mortgage, trust receipt loan and warehouse financing)
- Co st of sources of short -term financing
- Factors to be considered while choosing appropriate source of short-term financing.
Unit 6. Private Equity and Venture Capital Financing
- Private equity fund
- Founders and angels
- Venture capital
- Importance of venture capital financing
- Stages of venture capital financing.
Unit 7. Warrants and Convertibles
- Use of warrants
- Valuation of warrants
- Convertible securities
- Valuation of convertible securities
- Reasons for issuing warrants and convertibles
- Effect of bonds/debentures with warrant and convertible financing on balance sheet and income statement
- Exchangeable debt.
Unit 8. Financial Distress
- Financial distress
- Bankruptcy liquidation
- Bankruptcy reorganization
- Going private and leveraged buyouts
- Leveraged recapitalizations
- Distress restructuring
- Bankruptcy, liquidation and reorganization in Nepal.
- Basic Books Rose, S. A., Westerfield, R. W., Jaffe, J. & Kakani, R. K. Corporate Fi nance. New Delhi:
- McGraw-Hill Education.
- Van Horne, J. C. & Dhamija, S . Financial Management and Policy . New Delhi: Dorling
- Kindersley.
Suggested Readings:
Brigham, E. F. & Ehrhardt, M. C. Financial management: Theory and Practice. New Delhi: Cengage Learning India. Brealey, R., Myers, S. C., Allen, F. & Mohanty, P. Principles of Corporate Finance. New Delhi: McGraw-Hill Book Company.