Taxmann Financial Management Theory Concepts Problems By R.P Rustagi Edition March 2024

This book is an authoritative and comprehensive guide exploring the multifaceted financial management field. This seminal work discusses the intricate decisions that individuals and business firms make, which carry financial implications. This book evaluates financial decisions to maximise firm value and shareholder wealth, as indicated by share market prices.

This book aims to fulfil the requirement of students preparing for professional exams conducted by ICAI, ICSI, ICWAI & students of post-graduate courses in commerce and management. This book will also be helpful for financial executives in updating their knowledge about current thinking and developments taking place in financial management.

The Present Publication is the 7^th Edition, authored by Dr. R.P. Rustagi, with the following noteworthy features:

• [Highlights of the 7^th Edition] are as follows:
  • Introduction of chapter summaries and points to remember
  • Inclusion of Objective Type Questions, Multiple Choice Questions (MCQs), and updates to chapters with recent developments in financial management
  • Additional discussions on Treasury Management, Portfolio Evaluation, Valuation of Futures and Swaps, Capital Structure theories, Foreign Capital Sources, and Risk Management Techniques
  • Updated with the latest examination questions, examples, and graded illustrations
  • Addition of ten case studies on Working Capital Management to expose students to real-life financial management problems, with selected hints for analytical approaches
• [Simple, Systematic & Comprehensive Explanation] The subject matter is presented using a simple, systematic method that comprehensively explains financial management concepts and theories. The book tries to explain the subject matter through realistic and practical examples.
• [Student-Oriented Book] This book has been developed keeping in mind the following factors:
  • Interaction of the author/teacher with their students in the classroom
  • Shaped by the author/teacher’s experience of teaching the subject matter at different levels for more than three decades
  • Reactions and responses of students have also been incorporated at different places in the book
• [Practical Solutions] The problems the financial managers may face and the decisions they must make have been explained in terms of this objective and the risk-return trade-off
• [Indian Capital Market in a Capsuled Form] Analysis & discussion on the changing structure of Indian Capital Markets
• [Highlights & Summaries] of every chapter have been provided in the form of Points to Remember
• [Financial Decision Making through EXCEL] is explained with the help of several numerical examples from different topics

The book is structured into 32 chapters across ten parts, each focusing on a specific area of financial management, with a special emphasis on the Indian Capital Market

• Points to Remember
• Graded Illustrations
• Object Type Questions (True/False)
• Multiple Choice Questions
• Assignments
• Problems (Unsolved Questions with Answers)

Contents of this book are as follows:

• [Part I – Background] The book comprehensively covers the field of finance, starting with the basics of financial markets, assets, and intermediaries, before discussing the mathematics of finance, highlighting the importance of concepts such as compounding, discounting, and the time value of money (TVM). It includes student activities, multiple-choice questions, assignments, and problems to reinforce learning
• [Part II – Valuation and Risk Management] This part focuses on valuation and risk management, introducing the valuation of securities, including bonds, convertible debentures, and equity shares. It covers the risk-return dimension, share valuation, and financial decision-making, supplemented by student activities and problems for practical understanding. The discussion on risk and return, portfolio management, the Capital Asset Pricing Model (CAPM), and the theory of portfolio selection deepen the reader’s understanding of investment strategies and risk management. It includes graded illustrations, objective questions, and assignments for a comprehensive learning experience
• [Part III – Long-Term Investment Decisions: Capital Budgeting] This part shifts to long-term investment decisions, discussing capital budgeting from cash flow estimation to evaluation techniques, addressing issues like inflation, capital rationing, and the impact of risk and uncertainty. Each chapter includes points to remember, illustrations, and questions to test understanding. Financial derivatives, including futures, options, swaps, and credit derivatives, are introduced, and their valuation models and strategies are explained. This section aims to equip readers with the knowledge to navigate the complex world of financial derivatives effectively
• [Part IV – Financing Decision] The book covers the cost of capital, leverage analysis, EBIT-EPS analysis, and the interplay between leverage, cost of capital, and firm value. These chapters are designed to provide a solid foundation in financial structuring and decision-making
• [Part V – Divided Decision] Dividend decision-making and the valuation of the firm are analysed, discussing the relevance and irrelevance theories of dividend policy and determinants of dividend policy, offering a nuanced understanding of how dividend decisions affect firm value
• [Part VI – Management of Current Assets] mainly working capital, cash, receivables, and inventory, is thoroughly analysed, presenting techniques for efficient management and financing of working capital
• [Part VII – Long-Term Finance and Financial Services] This part focuses on Long-Term Finance and Financial Services, addressing various sources of long-term financing domestically and internationally. It explores domestic sources like debt and equity, long-term debt securities, private equity, foreign capital, Euro issues, and external commercial borrowings. This section emphasises the importance of understanding the diverse options available for long-term financing and their implications for corporate strategy. The discussion extends to lease financing, including types of lease arrangements, treatment of transactions, and the critical evaluation of lease versus buy decisions, supported by the Bower-Herringer-Williamson (BHW) model. Financial services covered include the roles and regulatory frameworks of non-banking finance companies, merchant bankers, venture capital financing, portfolio management, credit rating, securitisation, and reverse mortgages. Student activities such as objective-type questions and assignments are provided to reinforce learning
• [Part VIII – Financial Analysis and Planning] This part analyses financial statements, financial planning, and forecasting fundamentals. It covers preparing and analysing balance sheets, income statements, and cash flow statements, utilising techniques like ratio analysis, comparative and common size statements, and trend percentage analysis. The section underscores the significance of financial analysis for strategic planning, investment decisions, and evaluating financial health. Financial planning is explored in depth, covering long-term and short-term perspectives, budgeting, capital and operating budgets, and the necessity of external funds requirement (EFR) calculations. This part aims to equip readers with the skills to conduct comprehensive financial analyses and develop robust financial plans
• [Part IX – Miscellaneous Topics] This part focuses on mergers, acquisitions, and financial reconstruction. It outlines the types and styles of mergers, the financial evaluation of merger proposals, the benefits and costs associated with mergers, and considerations for financing them. Acquisition is discussed as a capital budgeting decision, and the section also covers corporate restructuring and the specifics of mergers and takeovers within the Indian context. This part provides insights into the strategic considerations behind corporate restructuring and the financial implications of mergers and acquisitions
• [Part X – Indian Capital Market] This part concentrates on the Indian Capital Market, providing an overview of its structure and efficiency, the role of various exchanges like the National Stock Exchange (NSE) and the Over The Counter Exchange of India (OTCEI), and the impact of capital market reforms and the Securities and Exchange Board of India (SEBI). Emerging trends within the Indian capital market, such as securities trading, investor protection, unfair trade practices, insider trading, mutual funds, hedge funds, depositories and scripless trading mechanisms, are discussed. This section aims to provide a comprehensive understanding of the complexities and dynamics of the Indian capital market, its regulatory environment, and its evolving trends

About The Author

Dr. R.P. Rustagi is Associate Professor, Department of Commerce, Shri Ram College of Commerce, University of Delhi. He is M.Com., M.Phil. (Accounting and Finance) from Delhi School of Economics, University of Delhi, besides being a Fellow Member of the Institute of Company Secretaries of India, New Delhi. He obtained Doctorate from Jiwaji University, Gwalior. He has been teaching Accounting and Finance at Shri Ram College of Commerce (his alma mater) for more than three decades. He is also associated with Post-graduate teaching in Department of Commerce, University of Delhi. He is a visiting faculty in Executive Development Programmes in Finance arranged by the ICAI, ICSI and other Management Institutes. As an academician, his areas of interest are Strategic Financial Management, Investment Management, Capital Market, etc. He is an established author in Accounting and Financial Management.