Financial Management notes – KNEC Diploma

Financial Management

• KNEC: Diploma in Business Management – Module III

• KNEC: Diploma in Human Resource Management – Module III

Topics covered in this unit/subject are as follows:

Topic 1: Introduction to Financial Management
Topic 2: Financing Decisions
Topic 3: Capital Structure And Cost of Financing
Topic 4: Financial Institutions in Kenya
Topic 5: Working Capital Management
Topic 6: Time Value of Money
Topic 7: Investment Decisions
Topic 8: Budgeting and Financial Forecasting
Topic 9: Financial ratio analysis
Topic 10: International financial management
Topic 11: Emerging Issues and Trends in financial management

Introduction

This module unit is intended to equip the trainee with knowledge, skills and attitudes that will enable him/her to apply financial management skills in running an organisation

General Objectives

At the end of this module unit, the trainee should be able to:

1. Recognize nature and scope of different types of financial institutions
2. Identify the sources of finance and their usefulness in managing a business
3. Recognize the role of financial institutions in the economy
4. Apply financial decisions in managing business assets
5. Apply basic financial models in assessing viable investment business project
6. Carry out capital budgeting for an organisation

Topic 1: Introduction to Financial Management

• Meaning of financial management
• Nature and scope of financial management
• Importance of financial management
• The role of Financial Management in production, marketing and finance
• Relationship of financial management with other disciplines
• Financial goal(s) of the firm
• Ethical challenges in financial management

Topic 2: Financing Decisions 

• Objective of financing decisions
• Criteria used to choose sources of finance
• Methods of raising finance
• Evaluation of financing methods
• Characteristics of different sources of finance
• Choice of preferred financial mix

Topic 3: Capital Structure And Cost of Financing

• Definition of finance
• Meaning of capital structure
• Determinants of capital structure
• Concept of cost of finance
• Importance of cost of finance
• Components of cost of finance
• Weighted average cost of capital
• Formulation of capital structure policy
• Dividend policy and capital structure
• Influence of taxation on financing decision

Topic 4: Financial Institutions in Kenya

• Financial system in Kenya
• Financial institution in Kenya
• Functions of financial institutions in Kenya
• Role of financial institutions in Kenya
• Factors that have leading to rapid growth of financial institutions
• Factors leading to failure of indigenous financial institutions

Topic 5: Working Capital Management

• Meaning of working capital
• Components of working capital
• Role of working capital in a firm
• Sources of financing working capital
• Mechanism of controlling working capital

Topic 6: Time Value of Money

• Definition of Time Value of Money
• Importance of Time Value of Money
• Future value of money
• Present future
• Loan amortization

Topic 7: Investment Decisions

• Meaning of the concept investments
• Meaning of investment appraisal techniques
• Importance of investment appraisal techniques
• Techniques of investment appraisal
• Limitations of investment appraisal techniques

Topic 8: Budgeting and Financial Forecasting

• Meaning of the concept of capital budgeting
• Budgeting techniques
• Capital budgeting process
• Capital was rationing
• Classifying investment projects
• Investment valuation
• Risk and capital budgeting
• Meaning of financial forecasting
• Reason for financial forecasting
• Advantages of financial forecasting

Topic 9: Financial ratio analysis

• Meaning of ratios
• Illustrating the value of ratios
• How ratios can assist in measuring the financial performance of a business
• Appraising a company’s financial performance
• Circumstances in which ratio analysis is most effective and those where it is of limited value
• Why ratios and performance data will vary from one type of business to another
• Interpret a cash flow statement
• Non-Financial Analysis

Topic 10: International financial management

• Meaning of International financial management
• International capital budgeting
• Risks involved in international financial management
• Types of exposures in International financial management
• International financial financing
• Distinction between domestic and International financial management

Topic 11: Emerging Trends and Issues

• Emerging trends and issues in financial management
• Challenges posed by emerging issues and trends in financial management
• Coping with challenges posed by emerging issues and trends in financial management