Certified Finance Specialist

Class 1
Fahim Rehan Khan
Email: fahim@bimsedu.com

About CFS

Awarded by IQN and SQA

IQN-International Qualifications Network

SQA-Scottish Qualifications Authority

SCQF Level 8 Qualification

Exam Duration: 60 minutes (computer based)

Total number of Questions in Exam: 40

CFS Content

Corporate Finance

Capital Investment

Process

Tools for Appraisal

Sensitivity analysis, capital rationing

Sources of finance

Cost of financing

Value of investment

Alternative sources of financing

Working Capital Management

Risk Management

Currency Risk

Interest rate risk

Tools used in managing risk

Examinable Topic

Beta

CAPM

Profitability Index

Project appraisal techniques

IRR

Convertible loan

Cost of equity and its value

WACC

Cost or savings of trade receivables

EOQ

Expected return to shareholders

Form of market efficiency

FRA

Hedging

Options

Short and long position

SWAPS/Forward/ futures

MM Propositions

Operating cash cycle

Overtrading

Pecking order theory

Preference share characteristics

Rights and bonus issue

Share offer pricing

What is Corporate
Finance?
Corporate Finance addresses the following three
questions:

1.

What long-term investments should the firm

engage in?

2.

How can the firm raise the money for the required
investments?

3.

How much short-term cash flow does a company

need to pay its bills?

Financial management
functions

Corporate Strategy

The Balance-Sheet Model of the Firm

Total Value of Assets:
Current
Assets

Total Firm Value to Investors:

Current
Liabilities

Long-Term
Debt

Fixed Assets
1 Tangible
2 Intangible

Shareholder
s Equity

The Balance-Sheet Model

of the Firm
The Capital Budgeting Decision

Current
Liabilities

Current
Assets

Long-Term
Debt
Fixed Assets
1 Tangible
2 Intangible

What
long-term
investmen
ts should
the firm
engage in?

Shareholder
s Equity

The Balance-Sheet Model

of the Firm
The Capital Structure Decision
Current
Assets

How can the

firm raise the
money for the
Fixed Assets required
investments?
1 Tangible
2 Intangible

Current
Liabilities

Long-Term
Debt

Shareholder
s Equity

The Balance-Sheet Model

of the Firm
The Net Working Capital Investment Decision

Current
Assets

Fixed Assets
1 Tangible
2 Intangible

Net
Working
Capital

How much
short-term
cash flow
does a
company
need to pay
its bills?

Current
Liabilities

Long-Term
Debt

Shareholder
s Equity

Capital Structure
The value of the firm can
be thought of as a pie.
The goal of the manager
is to increase the size of
the pie.
The Capital Structure
decision can be viewed as
how best to slice up a the
pie.

70%
25%
50%
30%
Debt
Debt
Equity
75%
50%
Equity

If how you slice the pie affects the size of the

pie, then the capital structure decision
matters.

Corporate Stakeholders

Agency theory

Agency relationships occur when one party, the

principal, employs another party, the agent, to
perform a task on their behalf

Objectives of principals and agents may not coincide

Problem of goal congruence

Separation of Ownership and

Control

Board of Directors

Assets
Equity

Shareholders

Debt

Debt holders

Management

Not-for Profit Organisations

Value For Money

Effectiveness

Spending funds so as to achieve the organisation's objectives

A measure of outputs

For e.g. number of pupils taught

Efficiency

Getting the best use out of what money is spent on

A measure of outputs over inputs

For e.g. Average class size

Economy

Being effective and efficient at the lowest possible cost

i.e. , for example, not spending $2 when the same thing can be
bought for $1

System analysis

THANK YOU