FOUNDATIONS IN FINANCIAL MANAGEMENT 1

(FFM 1)
Course Syllabus

1. General Information
Course name: FOUNDATIONS IN FINANCIAL MANAGEMENT 1 (FFM1-
Quản trị tài chính 1)
Course code:
Number of credits: 3
2. Objectives
The objective of the FFM1 module is to develop knowledge and understanding
components of business working capital, including cash, inventory, account payables and
account receivables. The module also aims to develop knowledge and skills on planning
and controlling cash flows, optimizing the use of working capital.
3. Abstract

The module first presents the management of working capital in business. This includes
understanding working management cycle, inventory control, accounts payable and
receivable control.
Secondly, the module introduces the nature and sources of cash, the importance of cash
flow management and distinguishes between the cash flow patterns of different types of
business organization. The module also presents cash budgeting and forecasting in
business (objectives of a cash budget, statistical techniques used in forecasting cash
flows, simple sensitivity analysis on a cash budget or forecast and how to prepare a
simple cleared funds forecast).
Finally, the module focuses on managing cash balance in business. This includes
introducing treasury function of business, the overview of financial markets, managing
deficit cash balance and managing surplus cash balance.

4. Teaching and learning methods

Lectures: 36h
Project & practice: 8h
Individual reading: 1h
5. Prerequisites
Prerequisites: None
Previous subject: None
6. Learning Outcomes
On successful completion of this course a learner will:
1. Explain and apply the principles of working capital management

Page 1 of 7
 2. Apply a range of accounting techniques used to forecast cash within the
organization
3. Describe methods and procedures for managing cash balances
7. Assessment Criteria

Learning outcomes Assessment criteria for pass

On successful completion of The learner can: explain/apply
this course a learner will:
LO1 Explain and apply the 1. Working capital management cycle
principles of working capital 2. Inventory control
management 3. Accounts payables and receivables control

LO2 Apply a range of 1. Nature and sources of cash

accounting techniques used to 2. Cash budgeting and forecasting
forecast cash within the
organisation
LO3 Describe methods and 1. Treasury function
procedures for managing cash 2. Overview of financial markets
balances 3. Managing deficit cash balances
4. Managing surplus cash balances

8. Outlines
Chapter 1. Working capital management
1.1. Working capital
1.1.1.Definition
1.1.2.Working capital characteristics of different businesses
1.1.3.Working capital management
1.2. Working capital (liquidity) ratios
1.2.1. The current ratio and the quick ratio
1.2.2. The receivables’payment period
1.2.3. The payables’s payment period
1.2.4. The inventory turnover period
1.2.5. Use the ratios to calculate the operating cycle
1.3. Working capital requirements
1.3.1. The need for funds for investment in current assets
1.3.2. The volume of current assets required
1.3.3. Over-capitalisation and working capital
1.3.4. The working capital requirement
1.3.5. Overtrading
1.4. Predicting business failure
Chapter 2. Account payables and Inventory control
2.1. Managing payables
2.1.1. Managing trade payables
2.1.2. Payable: A source of short-term finance
2.1.3. Trade credit
2.1.4. Trade credit and the cost of lost early payment discounts
2.1.5. Other creditors
2.2. Methods of paying suppliers

Page 2 of 7
 2.2.1. Payments by cash
2.2.2. Payments by cheque
2.2.3. Bank giro credits
2.2.4. Payments by banker’s draft
2.2.5. Payments by standing order and direct debit
2.2.6. Payments by telegraphic transfer (TT) or mail transfer (MT)
2.2.7. Bankers’ automated clearing services (BACS)
2.2.8. Clearing house automated payments system (CHAPS)
2.3. Inventory control
2.3.1. Inventory costs
2.3.2. A deterministic model: the basic EOQ formula
2.3.3. Uncertainties in demand and lead times: a re-order level system
2.3.4. Maximum and minimum inventory level
2.3.5. The effect of discounts
2.3.6. Just-in-time (JIT) procurement
Chapter 3. Account receivables control
3.1. Credit control
3.1.1. Types of credit
3.1.2. Credit control
3.2. Total credit
3.2.1. Measuring total receivables
3.2.2. Effect on profit of extending credit
3.2.3. Customer quality and liquidity
3.3. Payment terms and settlement discounts
3.3.1. Terms and conditions of sale
3.3.2. Payment terms
3.3.3. Methods of payment
3.3.4. Percentage cost of an early settlement discount
3.3.5. Potential benefits of settlement discounts
3.3.6. Late payment
3.4. Credit control department
3.4.1. Roles of the credit control department
3.4.2. Credit cycle
3.5. Legal aspects of granting credit
3.5.1. Contract
3.5.2. Essential elements of contract
3.5.3. Mistake, misrepresentation and breach of contract
Chapter 4. Nature and sources of cash
4.1. Cash flow cycle
4.2. Operating cycle
4.3. Types of cash transaction
4.3.1. Capital and revenue items
4.3.2. Exceptional and unexceptional items
4.3.3. Regular and irregular items
4.3.4. Cash outflows
4.3.5. Cash inflows
4.3.6. Cash flows monitoring
4.3.7. Net cash flow
4.4. Profits and cash flow

Page 3 of 7
 4.4.1. Trade profits and cash flows are different
4.4.2. Negative cash flows
4.4.3. The difference between profit and cash flow: Implications
4.4.4. Negative operational cash flows: Implications
4.5. Cash accounting and accrual accounting
4.5.1. Acrruals concept
4.5.2. Relevance of accruals basis of accounting
4.5.3. The importance of cash flow information
Chapter 5. Cash budgeting and forecasting
5.1. Purpose of forecasts
5.1.1. Deficiencies
5.1.2. Cash surplus
5.1.3. Types of forecast
5.1.4. Receipts and payment forecasts
5.1.5. Balance sheet based forecasts
5.2. Guidelines on preparing a forecast
5.2.1. Cash budgets in receipts and payments format
5.2.2. Preparation of a cash budget
5.2.3. Assumptions
5.3. Cleared funds forcasts
5.4. Cash forecast based on financial statements
5.4.1. Balance sheet based forecast
5.4.2. Estimating a future balance sheet
5.4.3. Main uses of balance sheet forecasts
5.4.4. Deriving cash flow from income statement and balance sheet information
5.4.5. Deriving an income statement from information on cash flow forecasts
5.4.6. Control and corrective action
5.4.7. Longer-term methods of easing cash shortages
5.4.8. Quality control of forecasts
5.4.9. Budgeting process and business plan
5.5. Cash forcasting techniques
5.5.1. Simple average growth models
5.5.2. Least squares method/linear regression analysis
5.5.3. Regression and forecasting
5.5.4. The components of time series
5.6. Sensitivity analysis and computer models
5.6.1. Sensitivity analysis
5.6.2. Alternative methods of uncertainty analysis
Chapter 6. Treasury function
6.1. The focus of cash management
6.1.1. Profitability
6.1.2. Liquidity
6.1.3. Safety
6.1.4. Issue of risk
6.2. Optimizing cash balances
6.2.1. Deviations from expected cash flows
6.2.2. Float
6.2.3. Measures of reduce the float
6.3. Cash management models
6.3.1. Baumol’s model

Page 4 of 7
 6.3.2. Drawbacks of Baumol’s model
6.4. Treasury management
6.4.1. The role of the treasurer
6.4.2. Centralization of the treasury department
6.4.3. Possible advantages of decentralized cash management
Chapter 7. Overview of financial markets
7.1. The banking system
7.1.1. Financial intermediation
7.1.2. Assets and liabilities of banks
7.1.3. Income and expenses of banks
7.1.4. The central bank
7.1.5. Building societies
7.2. Financial markets
7.2.1. Money market
7.2.2. Stock market
7.2.3. Alternative investment market (AIM)
7.2.4. Reason for seeking a stock market listing
7.2.5. Disadvantages of a stock market listing
7.2.6. Methods of obtaining a listing
7.3. Cash investment
7.3.1. Nominal rate and effective interest rate
7.3.2. Bank deposits
7.3.3. Finance company deposits
7.3.4. Building societies deposits
7.3.5. Marketable securities: prices and interest rates
7.3.6. Gilts
7.3.7. Local authority and other public sector stocks
7.3.8. Certificates of deposit
7.3.9. Bills of exchange
7.3.10. Other commercial stocks
7.3.11. Ordinary shares
7.3.12. Preference shares
7.3.13. Loan notes
7.3.14. Convertibles and warrants
Chapter 8. Managing deficit cash balances
8.1. Cash deficit
8.2. Budgeting for cash deficit
8.3. Methods of easing cash shortages
8.3.1. Bank loans
8.3.2. Overdraft
8.3.3. Trade credit
8.4. Risk of increasing short-term finance
Chapter 9. Managing surplus cash balances
9.1. Budgeting for surplus
9.2. Cash surplus
9.3. What should be done with a cash surplus
9.3.1. Economist’s view
9.3.2. Cash management policy of a business

Page 5 of 7
 9.3.3. Cash require for transactions and precautionary purposes
9.3.4. Profitability
9.3.5. Guidelines for investing
9.4. Risk and exposure
9.4.1. Effects of risk
9.4.2. Causes of risk
9.4.3. Relationship between risk and return
9.4.4. Diversification and holding a portfolio
9.4.5. Systematic risk and unsystematic risk: implications for investments
9. Required Textbooks
1. Foundation on Financial Management, Lecture note, PTIT.
2. Foundation on Financial Management, Study text, BPP learning media
(version updated yearly).
3. Foundation on Financial Management, Practice and Revision Kit, BPP learning
media (version updated yearly).
10. Suggested Textbooks
1. Foundation on Financial Management, Pass card, BPP learning media (version
updated yearly).
2. Foundation on Financial Management, Previous exams.
3. Foundation on Financial Management, Related articles, BPP learning media.
11. Schedule

Main contents Duration Specific contents

4h lectures
Chapter 1. 1.1. Working capital
Working capital 1.2. Working capital (liquidity) ratios
management 1.3. Working capital requirements
1.4. Predicting business failure

4h lectures
Chapter 2. 1.1. Managing payables
2h practice
Account payables 1.2. Methods of paying suppliers
and Inventory 1.3. Inventory control
control
4h lectures
Chapter 3. 1.1. Credit control
1h practice
Account 1.2. Total credit
receivables 1.3. Payment terms and settlement
control discounts
1.4. Credit control department
1.5. Legal aspects of granting credit
4h lectures
Chapter 4. 1.1. Cash flow cycle
Nature and 1.2. Operating cycle
sources of cash 1.3. Types of cash transaction
1.4. Profits and cash flow

Page 6 of 7
 1.5. Cash accounting and accrual
accounting
4h lectures
Chapter 5. 1.1. Purpose of forecasts
2h practice
Cash budgeting 1.2. Guidelines on preparing a forecast
and forecasting 1.3. Cleared funds forecasts
1.4. Cash forecast based on financial
statements
1.5. Cash forecasting techniques
1.6. Sensitivity analysis and computer
models
4h lectures
Chapter 6. 1.1. The focus of cash management
1h practice
Treasury 1.2. Optimizing cash balances
function 1.3. Cash management models
1.4. Treasury management
4h lectures
Chapter 7. 1.1. The banking system
Overview of 1.2. Financial markets
financial markets 1.3. Cash investment
4h lectures
Chapter 8. 1.1. Budgeting for cash deficit
1h practice
Managing deficit 1.2. Cash deficit
cash balances 1.3. Methods of easing cash shortages
1.4. Risk of increasing short-term
finance
4h lectures
Chapter 9. 1.5. Budgeting for surplus
1h practice
Managing 1.6. Cash surplus
surplus cash 1.7. What should be done with a cash
balances surplus
1.8. Risk and exposure

12. Grading Policy

Attendance: 10%
Average of mini mid-term tests: 20%
Assignment: 10%
Final exam (practice room): 60%

Page 7 of 7