COLLEGE OF SCIENCE, TECHNOLOGY AND APPLIED ARTS OF

TRINIDAD AND TOBAGO

Transforming Lives, Transforming Communities, Transforming the Nation….

One Student at a Time.

SCHOOL OF BUSINESS AND INFORMATION TECHNOLOGY

2023 – 2024 COURSE OUTLINE

VISION : To be a student-centered, dynamic and innovative, world-class and

multi- campus college, promoting excellence in teaching and learning,
serving diverse communities, and producing lifelong learners who can
compete globally.

MISSION : To be the premier educational institution in: providing High quality,

affordable and accessible education programmes serving the needs
of business, industry and the diverse campus communities and
facilitating the personal and professional development of its students,
faculty and staff.

DEPARTMENT : Management and Entrepreneurship

COURSE TITLE : Financial Management

COURSE CODE : FINC 205

CREDITS : Three (3)

PREREQUISITES : ACCT 126 – Fundamentals of Accounting

REQUIRED TEXT : Principles of Managerial Finance

Lawrence J. Gitman and Chad J. Zutter, Pearson (Addison Wesley),
Latest Edition

REFERENCE TEXTS : Fundamentals of Corporate Finance

Ross, Westerfield, Jordan and Roberts, Latest Edition, McGraw Hill

International Corporate Financial Analysis

Ian Hirst, Heriot Watt University, Latest Edition

APPROVED BY:
CHAIR DATE

__________________________ ____________________
 College of Science Technology and Applied Arts of Trinidad and Tobago
FINC 205 – Financial Management

COURSE DESCRIPTION
This course assumes completion of ACCT 126 - Fundamentals of Accounting, and is the first of
a two-component programme that introduces the basic tools and concepts of finance. The
course will be taught over a 13-week period. Students will be exposed to the purpose of
managerial finance, an overview of the financial market environment, time value of money,
asset valuation, risk and return assessment, as well as the process involved in long-term
investment decision making. The concepts taught will be reinforced through the use of
practical problems faced by individuals and businesses. This course and its second-
component, FINC 310 - Corporate Finance, provide the critical tools needed for further study
in finance.

LEARNING OUTCOMES
Upon successful completion of this course, the student should be able to:
(i) Explain the role and function of financial management and corporate finance
(ii) Identify and describe all elements in the financial market environment
(iii) Explain the role of financial markets in an economy
(iv) Utilise time value formulae, present and future value tables, and Excel Workbook to
calculate present and future values of money
(v) Utilise time value of money principles to estimate loan amortisation, and compute
special deposits to accumulate a future sum
(vi) Define risk and return; describe the relationship between risk and return, and assess
and measure the risk and return of assets.
(vii) Describe and apply asset valuation principles to calculate the value of stocks and
bonds
(viii) Compute and use financial ratios to analyse the financial statements of public
companies
(ix) Describe the three categories of relevant cash flows (initial investment, operating
cash flow and terminal cash flow) and calculate initial investment and terminal cash
flow
(x) Discuss the key motives for capital expenditure and the steps in the capital budgeting
process.
(xi) Evaluate long-term investment projects using various investment criteria (Payback,
NPV, and IRR).

SYLLABUS OVERVIEW
1. The managerial finance function
2. Financial market within an economy
3. Introduction to stocks and bonds
4. Time value of money
5. Introduction to risk and rates of return
6. Valuation of stocks and bonds
7. Evaluating a firm’s financial performance
8. Relevant cash flows and other topics in capital budgeting
9. Introduction to capital budgeting techniques
(PLEASE CONTINUE TO THE NEXT PAGE)

2
Revised 2019/20
 College of Science Technology and Applied Arts of Trinidad and Tobago
FINC 205 – Financial Management

REQUIRED TEXT
Gitman, L.J and Zutter, C. J. (2012). Principles of Managerial Finance (13th ed.). Boston: Pearson

DETAILED SYLLABUS
1) UNIT 1 - WEEK 1 - The managerial finance function – Chp 1
a) Introduction to the nature and purpose of financial management
i. Define finance and briefly identify the various careers in finance
ii. Distinguish between managerial finance and accounting
 Briefly discuss the managerial finance function within an organisation
 Highlight the relationship between managerial finance and economics
 Discuss the relationship between managerial finance and accounting
ensuring to highlight their differences (i.e. emphasis on cash flows, and
decision making)
iii. Identify the primary activities of the financial manager highlighting the main
responsibilities including:
 Raising of short-term and long-term finance
 The investment and capital budgeting decisions
 The management of working capital
 The management of risk introduction
b) Identify and briefly describe the various forms of profit making business entities
including sole trader, partnership, limited liability company, cooperative and state
enterprise.
c) Discuss the various goals of profit making business entities:
i. Describe the relationship among financial objectives, corporate objectives and
corporate strategy.
ii. Emphasize the difference among profit maximization, wealth maximization
and earnings per share growth.
iii. Explain the responsibility of the financial manager to the shareholders (wealth
maximization).
d) Stakeholder Objectives (Emphasise to students that this is important in limited liability
companies)
i. Identify the various stakeholders of an organisation and their objectives
ii. Discuss the conflicts that may arise with stakeholder objectives.
iii. Explain the principal-agent relationship
iv. Define the agency problem and describe how they give rise to agency costs
v. Identify and describe the various methods available to foster the achievement
of stakeholder objectives including:
- Share options and performance related pay (i.e. managerial reward
schemes).
- Corporate governance mechanisms used to manage the agency
problem.
- Regulatory requirement (e.g. stock exchange listing requirement)

(PLEASE CONTINUE TO THE NEXT PAGE)

3
Revised 2019/20
 College of Science Technology and Applied Arts of Trinidad and Tobago
FINC 205 – Financial Management

2) UNIT 2 - WEEKS 2 & 3 - Evaluating a firm’s financial performance – Chp 3

a) Review of limited liability company financial statements
i. Income Statement (Statement of Comprehensive Income)
ii. Balance Sheet (Statement of Financial Position)
iii. Cash Flow Statement
iv. Statement of Changes in Equity
b) Firm’s Cash Flows
i. Define cash flows
ii. Citing items from the income and balance sheet statements distinguish
between cash inflows and cash outflows
iii. Identify and describe the three main categories of cash flows found in the
Cash Flow Statement
 Operating Flows
 Investment Flows
 Financing Flows
iv. Describe Free Cash Flow and distinguish between operating and free
cash
 Describe the role of Operating Cash Flow in assessing a
company’s performance
OCF = EBIT (1-tax rate) + depreciation
 Describe the role of Free Cash Flow in assessing a company’s
performance
FCF = EBIT (1-tax rate) + depreciation + amortization –
change in net working capital – capital expenditure.
OR
FCF = EBIT (1-tax rate) + depreciation - (change in net fixed
assets + depreciation) – change in net working capital
c) Financial Ratios
i. Identify, describe and calculate the five categories of ratios including:
 Liquidity (current and quick ratio)
 Activity/Efficiency (debtor collection, creditor payment, inventory turnover,
asset turnover)
 Profitability (gross profit margin, net profit margin, operating profit margin,
return on equity, return on assets, earnings per share and dividend per
share)
 Financing (debt ratio, capital gearing, times interest earned, debt/equity
ratio, equity ratio, fixed-payment coverage ratio)
 Market/Investor (price earnings ratio, market-to-book ratio)
ii. Use ratios to comment on financial performance over time, within industry and
with industry averages. Students should be familiar with calculations but will
be examined on the interpretation.

(PLEASE CONTINUE TO THE NEXT PAGE)

4
Revised 2019/20
 College of Science Technology and Applied Arts of Trinidad and Tobago
FINC 205 – Financial Management

3) UNIT 3 - WEEKS 4 & 5 - Time value of money – Chp 5

a) Explain the concept of time value and its significance to money management
i. Define cash flow
ii. Identify and describe the four (4) streams of cash flows
 Single lump sum
 Mixed stream
 Annuity (ordinary and annuity due)
 Perpetuity
iii. Distinguish between present value and future value
iv. Distinguish between simple interest and compound interest
v. Distinguish between compounding and discounting
b) Calculate the present value of the following using formula, tables and Excel:
i. Single Amounts (Annual, Semi-Annual, Quarterly, Continuous Discounting)
ii. Mixed Stream (Annual, Semi-Annual, Quarterly, Continuous Discounting)
iii. Annuities (Ordinary and Annuity Due)
iv. Perpetuity
c) Calculate the future value of the following using formula, tables and Excel:
i. Single Amounts (Annual, Semi-Annual, Quarterly, Continuous compounding)
ii. Mixed Stream (Annual, Semi-Annual, Quarterly, Continuous compounding)
iii. Annuities (Ordinary and Annuity Due)
iv. Perpetuity
d) Distinguish between the nominal and effective interest rates and illustrate how to
calculate
e) Special applications of time value of money
i. Calculate Loan amortisation (including the annual payment on the loan)
ii. Calculate Special deposits to accumulate a future sum (e.g. monthly or
annual cash flow to save to purchase a home)
iii. Calculate interest or growth rates

4) UNIT 4 - WEEK 6 - Financial market within an economy – Chp 2; pgs 31 – 43, 49 -

52
a) The role of financial intermediaries in facilitating business financing
i. Describe the main functions of financial intermediaries
ii. Citing examples from within the Caribbean briefly describe the major financial
intermediaries and their role in providing business financing:
 Commercial Banks
 Non-Bank Financial Institutions (i.e. Investment Banks)
 Credit Unions
 Insurance Companies
 Savings Bank
 Mutual Funds
 Unit Trust and Home Mortgage Bank

(PLEASE CONTINUE TO THE NEXT PAGE)

5
Revised 2019/20
 College of Science Technology and Applied Arts of Trinidad and Tobago
FINC 205 – Financial Management

UNIT 4 - WEEK 6 - Financial market within an economy – Chp 2; pgs 31 – 43, 49 -

52 (cont’d)
b) Understanding money markets and capital markets both nationally and internationally
i. Discuss the role of money markets (short-term liquidity in private and public
sector) both nationally and internationally
 Provision of short-term liquidity to the private and public sector
 Explain how banks and other financial institutions utilise money
markets
 Identify and describe the features and purpose of the main money-
market instruments (discount instruments, interest-bearing
instruments and derivative products)
- Provide national and international examples
ii. Explain the nature and function of capital markets - stock market and bond
market (both corporate and government bond market)
iii. Identify and briefly describe the types of instruments used in both money and
capital markets
 Money market instruments: certificates of deposits, commercial paper,
federal funds in US, treasury bills, municipal notes in US
 Capital market instruments: stocks, bonds, derivatives (briefly describe as
hedging instruments)

5) UNIT 4 - WEEK 6 - Introduction to stocks and bonds – (Chps 6 & 7; pgs 226 – 238,
266 – 277)
a) What is a stock? What is a bond? Distinguish between the two.
b) Identify, briefly describe, and distinguish between the various types of
i. Stocks (common and preferred)
ii. Bonds (corporate vs government; secured vs unsecured; Eurobond vs
domestic bond vs foreign bond; contemporary bonds (i.e. junk, zero or low
coupon, floating rate, extendible, putable bonds)
c) Discuss the features of common and preferred stock
d) Describe the characteristics of bonds
i. Interest (coupon interest) – variable rate, fixed rate, annual and semi annual
ii. Par value – denomination of the bond
iii. Term Structure of Interest Rates (this includes the theories of term structure)
- Expectations theory
- Liquidity Preference Theory
- Market Segmentation Theory
iv. Bond Yields (Current Yield, Yield to Maturity (YTM) and Yield to Call)
v. Tenor – time between first issuance and maturity
vi. Duration of the bond – time between year of consideration and maturity
vii. Bond Ratings

(PLEASE CONTINUE TO THE NEXT PAGE)

6
Revised 2019/20
 College of Science Technology and Applied Arts of Trinidad and Tobago
FINC 205 – Financial Management

6) UNIT 5 - WEEK 7 – Introduction to risk and rates of return – (Chps 6 & 8; pgs
219 – 231; 307 – 330)
a) Risk and return fundamentals
i. Define risk and explain the various types of risk
 Describe and distinguish between systematic and unsystematic risk (aka
non-diversifiable and diversifiable risk respectively)
 Portfolio risk
ii. Define return
iii. Explain the relationship between risk and return using practical examples
- Distinguish between risk free and risk-premium
iv. Identify the various risk preferences (risk averse, risk neutral, risk seeking)
b) Explain the basic principles of interest rates
i. What are interest rates
ii. Explain when the terms “interest rate” and “ required rate of return” are used
iii. Identify the factors that influence interest rates and briefly describe their
impact on interest rates (inflation, risk and liquidity preference)
iv. Distinguish among the real and nominal rate of interest
c) Introduction to measuring risk of a single asset
i. Identify and briefly describe the steps involved in measuring the risk of a
single asset
ii. Identify and briefly describe the various ways in which risk for a single asset
can be assessed and measured
 Risk assessment (range, scenario analysis, probability distribution)
 Risk measurement (standard deviation, expected return, coefficient of
variation (CV)) – NO CALCULATIONS
d) Fundamentals of Portfolios and diversification
i. What is a portfolio? What is an efficient portfolio?
ii. Define correlation. Identify and describe the various types of correlation:
 Positive and perfectly positive correlation
 Negative and perfectly negative correlation
 No correlation (uncorrelated)
iii. Explain diversification and its purpose

FIRST QUIZ: Week 7 (SUNDAY 22 nd OCTOBER 2023)

Topics: The managerial finance function; Financial market within an
economy; Introduction to stocks and bonds; Evaluating a firm’s financial
performance; Time value of money – Multiple Choice Quiz (questions
should assess calculations and theory)

7) UNIT 6 - WEEKS 8 & 9 - Valuation of stocks and bonds (Chps 6 & 7; pgs 239 –
262, 277 - 305)
a) Valuation fundamentals
i. Explain the purpose of valuing assets
ii. Identify and describe the three key inputs of the valuation process (cash flow,
expected rate of return, duration of investment)
(PLEASE CONTINUE TO THE NEXT PAGE)

7
Revised 2019/20
 College of Science Technology and Applied Arts of Trinidad and Tobago
FINC 205 – Financial Management

iii. Discuss the basic valuation model

CF1 CF2 CFn
i. V 0    ...... 
(1  r ) (1  r )
1 2
(1  r ) n
b) Bond Valuation
i. Explain the basic bond valuation model
ii. Calculate the value of a bond with annual and semi-annual interest payments
iii. Calculate Yield to Maturity
c) Interpret bond quotations
d) Market Efficiency
i. Explain market efficiency?
ii. Briefly describe the Efficient Market Hypothesis
e) Stock Valuation
i. Explain the basic common stock valuation model (the value of a stock equals
the present value of all its expected future cash flows (dividends)
ii. Calculate the value of a stock using the following Stock Valuation Models
 Zero Growth Model and Valuing Preferred Stock
 Constant-Growth Model
 Variable Growth Model
 Free Cash Flow Model (briefly describe free cash flow)
 Book Value per share, Liquidation Value per share, Price/Earnings (P/E)
Multiples approaches
f) Discuss the impact that financial decisions can have on return, risk and firm’s value

8) UNIT 7 - WEEKS 10 & 11 - Relevant cash flows and other topics in capital
budgeting – (Chp 11; pgs 426 – 438; 443 – 462)
a) Relevant cash flows
i. What are relevant cash flows?
ii. Identify and describe the major cash flows of any project (initial investment,
operating cash flows, terminal cash flows)
b) Explain key concepts in the capital budgeting process
i. Distinguish between expansion decisions and replacement decisions
ii. Describe sunk costs and opportunity costs
c) Calculate the Initial Investment and its components:

i. Initial Installed Cost After Tax Proceeds Change in Net

Investment = of New Asset - from Sale of Old Asset  Working Capital

ii. Installed Cost of New

= + Installation Costs
Cost Asset

After Tax Proceeds from Proceeds from Sale Tax on Sale of

iii. Sale of Old Asset = of Old Asset  Old Asset

iv. Change in Net Change in Change in Current

Working Capital = -
Current Assets Liabilities

d) Calculate Terminal Cash Flow

(PLEASE CONTINUE TO THE NEXT PAGE)

8
Revised 2019/20
 College of Science Technology and Applied Arts of Trinidad and Tobago
FINC 205 – Financial Management

9) UNIT 8 – WEEK 12 - Capital budgeting techniques – Chp 10

a) Define capital budgeting
b) Identify and briefly describe the types of long-term investments made by firms
i. Fixed assets
ii. Securities
c) Identify and briefly discuss the various reasons for capital expenditure
i. Expansion of operations
ii. Replacement or renewal of fixed assets
iii. To obtain other less tangible benefits over a long period
d) Identify and briefly discuss the various steps in the capital budgeting process,
ensuring to identify the steps that will be used in this course
i. Proposal generation
ii. Review and analysis (this is the focus of this section of course)
iii. Decision making (this is the focus of this section of course)
iv. Implementation
v. Follow up
e) Distinguish between key concepts in capital budgeting
i. Capital Expenditure and Operating Expenditure
ii. Independent Projects and Mutually Exclusive Projects
iii. Unlimited Funds and Capital Rationing
iv. Accept-Reject Approaches and Ranking Approaches
f) Identify, briefly describe the various capital budgeting techniques
i. Payback Period
ii. Net Present Value
iii. Profitability Index
iv. Internal Rate of Return (IRR)
g) Calculate the following:
i. Payback Period
ii. Net Present Value
iii. Profitability Index
iv. Internal Rate of Return (IRR)

SECOND QUIZ: Week 12 (SUNDAY 26TH NOVEMBER 2023)

Topics: Risk and rates of return; Valuation of stocks and bonds;
Relevant cash flows and other topics in capital budgeting; Capital
budgeting techniques – Multiple Choice Quiz (questions should assess
calculations and theory)

WEEK 13 – EXAMINATION WEEK (04TH TO 17TH DECEMBER 2023)

TEACHING AND LEARNING STRATEGIES

The instructor will deliver lectures during each session, in order to introduce the theoretical
and conceptual issues underpinning the course. An interactive approach will be used and
students are encouraged to participate actively in class discussions, to think for themselves
and freely express their views.
(PLEASE CONTINUE TO THE NEXT PAGE)

9
Revised 2019/20
 College of Science Technology and Applied Arts of Trinidad and Tobago
FINC 205 – Financial Management

The in-class activities, assignments, group work, and readings are very important to the
teaching-learning process. This course is hands-on and requires students to master a range
of computational skills, using tables and the financial calculator.

It is imperative that students attempt as many of the relevant questions that appear at the
end of each chapter of the text.

STUDENT EVALUATION AND GRADING

Student grades will be awarded as follows:
Group Assignment 35%
Quiz 1 10%
Individual Assignment 15%
Quiz 2 10%
Final Examination 30%
TOTAL 100%

Quizzes
The Quizzes will be administered online. Quizzes will be available for 24 hours for students
to complete. Students will need to allocate at least one hour of uninterrupted time to
complete. Quizzes will serve as an assessment tool to ensure that you understand the
material as the course progresses. There will be no make-up quizzes.

Individual and Group Assignments

The Individual and Group take home assignments will help students to prepare for the final
examination. Although collaboration is allowed in both assignments, especially in the group
assignment, it is very important that each student attempt questions in both assignments
independently. This is to ensure a comprehensive understanding of the material. With
regards to the group assignment, it will be foolish to simply copy your colleagues’ work after
submission, as this will not foster learning. ALL assignments must be neatly typed, in
accordance with established standards for tertiary education. Marks will be deducted for
poorly presented assignments.

No late assignments will be accepted.

Marks for quizzes and individual assignments will be awarded for the following
characteristics, in order of relative importance:
 Accuracy of concepts and computations
 Comprehensiveness
 Format and presentation

(PLEASE CONTINUE TO THE NEXT PAGE)

10
Revised 2019/20
 College of Science Technology and Applied Arts of Trinidad and Tobago
FINC 205 – Financial Management

Final Examination
The final examination will be administered in accordance with COSTAATT’s examination
schedule. The examination will be closed-book and will be comprehensive in nature;
drawing from all topics that would have been covered in the class.

% Points Notation Grade Quality Points

90 – 100 Excellent A 4.0
85 – 89 Very good B+ 3.5
80 – 84 Good B 3.0
75 – 79 Satisfactory C+ 2.5
70 – 74 Average C 2.0
65 – 69 Below average D+ 1.5
60 – 64 Minimum passing grade D 1.0
0 – 59 Fail F 0

STUDENT RESPONSIBILITIES
If you desire to do well in this course, you must accept the following responsibilities:
 Attend classes regularly and punctually
 Complete all assignments and projects on time and in accordance with instructions
and required standards.
 Actively participate in class discussions in a meaningful way
 Read all assigned material before the relevant class session.
 Work end-of-chapter questions

INSTRUCTOR RESPONSIBILITIES
The instructor undertakes to:
 Attend classes regularly and punctually
 Be prepared for each class
 Be available to students for consultations
 Engage students in the teaching/learning process
 Test in accordance with learning objectives

THE END

11
Revised 2019/20