Tribhuvan University
Faculty of Management
Office of the Dean
Bachelor of Business Administration (BBA)
Course Objective
:The purpose of this course is to impart knowledge and analytical skills of corporate finance to raising funds most effectively by business firms. After this course, the students will have a clear understanding of sources of funds used by a corporation, compare the cost of different sources of short-term funds, analyze the pros and cons of each source of financing, raise capital from the capital market by issuing securities, and 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.
Course Contents:
Lecture hours show the approximate classroom time allocated to each unit.
Unit 1.Introduction
- An overview of corporate financing decisions: instruments, markets, and financial intermediaries
- Ethics in financing decisions
- Financial innovations and corporate finance
- Capital structure and financial structure
- Optimal capital structure and 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: Features of common stock
- Legal rights and privileges of common stockholders
- Advantages and disadvantages of common stock
- Methods of selling securities: public offering, rights offering and private placement
- Analysis of rights offering and effect of rights offering on shareholders’ wealth
- Effect of each financing alternative on balance sheet and income statement.
Unit 3.Term Loan and Lease Financing
- Key characteristics of term loan, advantages and disadvantages of term loan financing, lenders of term loan, documents required for term loan
- Loan amortization schedules
- Provision of moratorium period
- Security provisions and protective covenants
- 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 leases
- Analysis of lease versus buy/borrow decision using present value of cash flow approach
- Lease financing in Nepal.
Unit 4.Short-term Financing
- Short-term versus long-term financing
- Advantages and disadvantages of short-term financing
- Unsecured sources of short-term financing: 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)
- Cost of sources of short-term financing
- Factors to be considered while choosing appropriate source of short-term financing.
Unit 5.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 6.Warrants and Convertibles
- Concept and 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 7.Financial Distress
- Financial distress
- Bankruptcy liquidation
- Bankruptcy reorganization
- Going private and leveraged buyouts
- Leveraged recapitalizations
- Distress restructuring
- Bankruptcy, liquidation, and reorganization in Nepal.
Suggested Readings:
Ross, S. A., Westerfield, R. W. & Jordan, B. D. Fundamentals of Corporate Finance. McGraw-Hill Irwin. Van Horne, J. C., Wachowicz, J. R. & Bhaduri, S. N. Fundamentals of Financial Management. New Delhi: Prentice-Hall India Ltd. Brealey, R. A., Myers S. C. & Alen, F.Principles ofCorporateFinance.McGraw-HillIrwin. Brigham, E. F. & Houston, J. F. Fundamentals of financial management.Cengage Learning. Gitman, L. J. Principles of managerial finance. Pearson Education.