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FM _ Project Guidelines_Fall 2024 (1)

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5 views

FM _ Project Guidelines_Fall 2024 (1)

Uploaded by

aneeskolachi50
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Financial Management

Fall-2024
Project Details
Marks Allocated: 15+5

The big picture.


o You should find a group 3-4 people to work with. You can make the judgment of optimal
group size.
o If Financial Management is best learned through application and in real time, there is no
better way to learn the subject than to try out everything we do in class on a real company
in real time.
o You should consider this project a live lab experiment that you will be doing in class.
o While I will try to guide you in applying the concepts of Financial Management to the
assigned companies.

Company Selection
o Each group will be assigned a publically traded company that have at least five years of
business history and financial statements. The company should be listed on PSX/KSE-100
market.

1. Business Strategy and Corporate Governance Analysis


o Is this a company where there is a separation between management and ownership? If so,
how responsive is management to stockholders?
o What are the other potential conflicts of interest that you see in this firm?
o How does this firm interact with financial markets? How do markets get information on
the firm?
o How does this firm view its social obligations and manage its image in society?

2. Potential Risk and Return Tradeoff


o What is the risk profile of your company? How much overall risk is there in this firm?
Where is this risk coming from (market, firm, industry or currency)? How is the risk profile
changing?
o What return would you have earned investing in this company’s stock?
o Would you have under or outperformed the market? How much of the performance can be
attributed to management?
o How risky is this company’s equity? What is its cost of equity?
o How risky is this company’s debt? What is its cost of debt?
o What is this company’s current cost of capital?

3. Distribution Policy
o How has this company returned cash to its owners? Has it paid dividends or bought back
stock?
o How much cash has the firm accumulated over time?
o Given this firm’s characteristics today, how would you recommend that they return cash to
stockholders (assuming that they have excess cash)?
o How much cash could this firm have returned to its stockholders over the last few years?
How much did it actually return?
o Given this dividend policy and the current cash balance of this firm, would you push the
firm to change its dividend policy (return more or less cash to its owners)?
o How does this firm’s dividend policy compare to those of its peer group and to the rest of
the market?

4. Capital Structure Choices


o What are the different types of financing that this company has used to raise funds? Where
do they fall in the continuum between debt and equity?
o How large, in qualitative or quantitative terms, are the advantages to this company from
using debt?
o How large, in qualitative or quantitative terms, are the disadvantages to this company from
using debt?
o From the qualitative trade off, does this firm look like it has too much or too little debt?

5. Working Capital Policy


o How has this company been managing its working capital? What is the Cash to Cash Cycle
and Operating cycle of the firm if any?
o How the company is managing its Cash, AR, AP and Inventory?
o Does Company has history of Bad debts?

6. Corporate Valuation & Financial Planning


o How to set the assumptions of financial projections of the firm?
o What growth pattern (Stable, 2-stage, 3-stage) would you pick for this firm? How long will
high growth last?
o What factors need to take care of while estimating the cash flows of the firm?
o What is your estimate of value of firm from operations and value of firm from equity on
the basis of discounted Cash Flows? Compare the true value of stock to its market value?
o What is the ‘key variable’ (risk, growth, leverage, profit margins...) driving this value?
o If you were hired to enhance value at this firm, what would be the path you would choose?

Project Submission Deadline: December 20, 2024

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