STRATEGIC FINANCIAL MANAGEMENT

Transcription

1 PRACTICE MANUAL PAPER : 2 STRATEGIC FINANCIAL MANAGEMENT BOARD OF STUDIES THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

2 This Practice Manual has been prepared by the faculty of the Board of Studies. The objective of the Practice Manual is to provide teaching material to the students to enable them to obtain knowledge and skills in the subject. In case students need any clarifications or have any suggestions to make for further improvement of the material contained herein, they may write to the Director of Studies. All care has been taken to provide interpretations and discussions in a manner useful for the students. However, the Practice Manual has not been specifically discussed by the Council of the Institute or any of its Committees and the views expressed herein may not be taken to necessarily represent the views of the Council or any of its Committees. Permission of the Institute is essential for reproduction of any portion of this material. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA All rights reserved. No part of this book may be reproduced, stored in retrieval system, or transmitted, in any form, or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior permission in writing from the publisher. Revised Edition : January, 2015 Website : bosnoida@icai.org Committee / : Board of Studies Department ISBN No. : Price : ` Published by : The Publication Department on behalf of The Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi Printed by : Sahitya Bhawan Publications, Hospital Road, Agra

3 A WORD ABOUT PRACTICE MANUAL The subject of Financial Management has acquired a critical significance now-a-days, due to recent surge in globalization and massive cross border flow of capital. The study of this subject opens new opportunities for Chartered Accountancy students. The paper stresses the importance of applying the knowledge and techniques of financial management to the planning, operating and monitoring of the finance function in particular as well as the organization in general. Further, this paper not only focuses on these aspects at the domestic level but also at the international level as well. The students are expected to cover the entire syllabus and also do practice on their own while going through this practice manual. Students are also advised to update themselves with the latest changes in the financial sector. For this they may refer to academic updates in the monthly journal The Chartered Accountant and the Students Journal published by the Board of Studies, financial newspapers etc. The course Study Material covers the theoretical framework in detail. This Practice Manual has been designed with the need of home-study and distance-learning students in mind. Such students require full coverage of the syllabus topics, and also the facility to undertake extensive question practice. The main aim of this Practice Manual is provide guidance as to the manner of writing an answer in the examination. The main features of this Practice Manual are as follows: Concepts in Brief: Important definitions, equations and formulae have been given before each topic for quick recapitulation. Previous examinations questions: Generous compilation of practice questions from the previous eighteen examinations. Students are expected to attempt the questions and then compare their solutions with the solutions provided in the manual. Assignment: Exercises have been given at the end of each topic for independent practice. Students can attempt these questions and compared their answers with answers provided at the end of each question. Matrix: Statement showing chapter-wise distribution of past six Examination Questions along with marks has been added. Additions: In this edition questions from November, 2013 & May, 2014 Final Examinations have been added under the respective chapters. Additions of theoretical

4 questions have been given in bold italics and addition of numerical questions have been shaded in grey. Further in order to maintain uniformity, some questions have been inter-changed from one chapter to another chapter. In case you need any further clarification/guidance, please send your queries at -id: or write to the Director of Studies, The Institute of Chartered Accountants of India, A-29, Sector-62, Noida Happy Reading And Best Wishes!

5 Paper 2 Strategic Financial Management Statement showing topic-wise distribution of Examination Questions along with Marks Chapter Term of Examination Total Nov May 2012 Nov May 2013 Nov May 2014 Marks Avg. Marks 1 Financial Policy and Corporate Strategy Q M Q M Q M Q M Q M Q M 7(a) 4 7(e) Project Planning and Capital Budgeting 3 Leasing decision including cross border leasing 7(a) 4 2(a), 3(b) 18 1(c), 2(a) 13 4 (b), 7(a) 12 1(b), 2(a), 6(c) (b) 8 3(a) Dividend Decisions 2(b), 4(b) 14 1(a) 5 3(b), 4(a) 14 7(a) Indian Capital Market 1(d), 6(b), 7(b) & (c) 6 Security Analysis 1(c), 3(b), 4(a) 21 1(b), 1(d), 4(a), 6(a), 7(b) 19 1(c), 7(a) 30 3(a), 4(b), 7(d) 9 1(b), 2(b), 5(a), 6(b) 20 1(d), 2(b), 6(b) 21 4(a), 5(b), 6(a) 22 7(b), 7(c) 25 5(a) 6 1(a) 5 1(a), 4(a), 6(a) 7 Portfolio Theory and Asset Pricing 6(a) 8 5(b) 8 1(b), 2(a) Financial Services in India 7(a) 4 3(b) 6 5(a), 6(b)

6 9 Mutual Funds 1(a) 5 6(b) 8 1(c) 5 3(a), 4(b) 18 1(d), 7(c) 9 3(a) Money Market Operations 7(d) 4 1(a), 7(c) 9 7(b) 4 7(b) & (c) 8 7(e) 4 1(c) Foreign Direct Investment, Foreign Institutional Investment and International Financial Management 12 Foreign Exchange Exposure and Risk Management 13 Mergers, Acquisitions and Restructuring 7(e) 4 7(d) 4 7(c) 4 5(b), 7(d) 1(b), 2(b), 5(b) 2(a), 3(a), 5(a), 7(f) 19 5(a), 7(e) 12 1(d), 3(b) 32 3(a) 8 2(a), 4(a), 5(b), 6(a), 7(e) 13 1(a) 5 1(c), 2(b), 7(b) 40 1(b), 6(a), 7(e) 14 6(b) 8 7(d) (a), 7(d) 17 1(d), 3(b), 5(b) 14 2(b), 4(b) Note: Q represents question numbers as they appeared in the question paper of respective examination. M represents the marks which each question carries. The question papers of all the past attempts of Final can be accessed from the Student Portal on the Institute s website

7 CONTENTS CHAPTER 1 FINANCIAL POLICY AND CORPORATE STRATEGY CHAPTER 2 PROJECT PLANNING AND CAPITAL BUDGETING CHAPTER 3 LEASING DECISIONS CHAPTER 4 DIVIDEND DECISIONS CHAPTER 5 INDIAN CAPITAL MARKET CHAPTER 6 SECURITY ANALYSIS CHAPTER 7 PORTFOLIO THEORY CHAPTER 8 FINANCIAL SERVICES IN INDIA CHAPTER 9 MUTUAL FUNDS CHAPTER 10 MONEY MARKET OPERATIONS CHAPTER 11 FOREIGN DIRECT INVESTMENT (FDI), FOREIGNINSTITUTIONAL INVESTMENT (FIIS) AND INTERNATIONAL FINANCIAL MANAGEMENT CHAPTER 12 FOREIGN EXCHANGE EXPOSURE AND RISK MANAGEMENT CHAPTER 13 MERGER, ACQUISITION & RESTRUCTURING

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