Certification Program on Corporate Treasury Management

Transcription

1 Certification Program on Corporate Treasury Management Introduction to corporate treasury management Introduction to corporate treasury management: relevance, scope, approach and issues Understanding treasury management Inter-link among Business Strategy, Organization and Finance Structure of Treasury Management Functions of Treasurer and Controller Role and functions of front, mid and back office of integrated treasury department Value creation in the corporate by the treasury and treasurer Treasury control framework Treasury performance management Macroeconomic Policy Environment Monetary, fiscal and external policies Growth forecasts, oil prices and inflation Interest rate policies and their impacts on treasury Current scenario and future outlook for India and globally Liquidity and Cash Management Working Capital management Working Capital Concepts Working Capital Issues Working Capital Cycle Managing Inventory Types of Inventories Inventory and price behaviour Motives for holding inventory Costs related to inventory Valuation of inventories Management of Inventory o Economic Order Quantity o Assembly line production o Batch production o Buffer inventory and safety stock 1

2 o Stock outs and costs related to that o Material Requirements Planning o Just In Time Managing Receivables Trade Credit Motives for extending trade credit Elements of Credit Policy Credit Limit Accounts Receivables management o Credit terms o Opportunity cost o Credit period o Discount policy o Ageing schedule o Financial statement analysis for receivables management o Credit scoring o Collection and monitoring o Provisioning and write offs Managing Payables Introduction to Accounts Payables Management Trade Credit Ratio Analysis Vendor management practices and purchase terms Disbursement float management Cash Management Cash Management Objectives Cash flow dynamics, forecasting and valuation Short-term funding investments Cash Management, pooling and netting Excess liquidity: short term investing Using capital market and bank debts Deciding on the maturity structure Analysis of Cash Flow Statements and Ratios Cash Management Techniques o Sales Cash Conversion Cycle (SCCC) o Cash Budget o Sensitivity Analysis 2

3 Short-term Financing Aggressive and Conservative Approach Sources of Short-Term Financing Policy objectives for short term borrowing Money market instruments and commercial papers Short dated bonds Funding securities acquisitions: the repurchase agreements Overview of Long-Term Financing Considerations of Issuers and Investors Sources of Long-term Finance Merits and Demerits of o Retained Earnings o Equity Capital o Preference Capital o Debenture Capital o Term Loans Raising Finance Loan Finance Types of loan finance Committed versus uncommitted facilities Issues in loan documentation o Availability o Fees o Margins o Gross up provision o Representations and warranties o Covenants Regulations involved in loan financing Debt securities Raising fund with long term debt securities Types of debt securities Process of issue Advantages and disadvantages of debt securities Important issues o Valuation o Pricing of a new issue Important regulations 3

4 o RBI guidelines o SEBI guidelines o Other regulations Equity funding Equity instruments o Ordinary shares o Preference shares o Warrants Issue of equity instruments in primary market (initial public offering) Underwriting Book building Secondary offering (follow on offers) Rights and bonus issues Private placements Determining the price for public offerings Share buy-backs Dividend payments and other corporate actions Treasury Investments and Assets Money Markets Money Market Instruments Coupon Bearing Instruments Discount Instruments Risks involved in Money Market Money market investment operations Clearing and settlement Fixed Income Markets Fixed income instruments Participants in fixed income markets Government securities Corporate Debt Markets Credit rating and its importance Trading in Fixed Income Securities Important Regulations Fixed income mathematics o Bond mathematics Face Value/Par Value Coupon 4

5 Term to Maturity Yield to Maturity Zero coupon Maturity Issuer Bond Price in the Market Yield Curve Current Yield STRIPs Price-Yield Relationship Yield to Call o Cost of funds, computation of various types of yield, yield curve analysis o Managing investment portfolio and trading strategies Derivatives in fixed income markets o Forwards o Futures o Options o Interest rate swaps o Exotic products Equity and Capital Markets Investing in capital markets Debt versus Equity Different Classes of Equity Stock exchange and stock indices Risk and Returns associated with equity Secondary Markets for Equities Spot equity markets Derivatives in equity markets o forwards o Futures o Options o Exotic derivatives Trading of Equities and equity derivatives o Open outcry versus screen based trading o Trading, types of orders, margins, risk management o Clearing and settlement International Equity Markets trading in ADR / GDR Factors Affecting Capital Markets Basic Mathematics of stocks 5

6 o Total Return from a stock o Dividend Yield o Capital gains / losses o Market Capitalization & Enterprise Value o Price / Earnings and other multiples Foreign Exchange Markets Overview of global financial markets International markets and instruments Structure Spot and Derivative markets Foreign exchange arithmetic Participants in foreign exchange markets Market Infrastructure o Dealing rooms o Information and Dealing Systems o Payment and Communication Systems Regulations Spot forex markets o Quotations At The Foreign Exchange Market Direct Quotations Indirect Quotations Relationship between bid and ask prices of currencies Two way quotes o Spread / Cost of Transaction o Value Dates and eligible value dates Forex derivatives o Forwards o Futures o Options o Swaps o Other exotic products Factors affecting foreign exchange market Trading, margining, clearing and settlement of forex deals Valuation aspects Commodities Markets Introduction to commodities markets Regulatory system in commodities markets in India Spot commodities market v/s. derivatives of commodities 6

7 Commodities exchanges in India Types of commodities being traded on exchanges Commodities as an asset class Trading of commodities derivatives Margining system Clearing and settlement Pricing of commodity futures Asset Liability Management and Risk Management Asset Liability Management (ALM) Objective of Asset Liability Management Scope of Asset Liability Management Importance of ALM function o Financial volatility o Explosion of new products o Regulatory initiative o Management recognition Strategic, organisational and operational framework Regulatory framework of ALM ALM information systems o Management Information System o Information availability, accuracy and adequacy ALM organisation o Structure and responsibilities o Level of top management involvement o Asset Liability Committee (ALCO) ALM process o Risk parameters o Risk identification o Risk measurement o Risk management o Risk policies and tolerance levels. Risk management Concept of Risk Risk Management Process 7

8 Determination of Business Objectives Identification of Risks Basic instruments Measurement of financial Risks Risk management strategies Interest rate risk Foreign Exchange risk Best practice reporting Enterprise wide risk management Management of risks using advanced mathematics GAP analysis Bucketing Duration and Modified Duration Convexity Value-at-risk Historical Simulation Monte Carlo Simulation Variance-Covariance Method Technical Analysis for Treasury Markets (interest rate and currency) Introduction and Rationale for technical analysis Analysis of Price movement Interpretation of volume Trend analysis Charting Methods Data and graphs generation Trend line construction Peak and Trough Analysis Understanding Primary, Intermediate and Minor Trends Trend lines -Gaps, Price - Volume Relationship Locating support and resistance Gap theory Minor trend change indicators Price patterns 8

9 Continuation and Reversal Patterns How to trade patterns Japanese Candlesticks Interpreting Candles at up- moves and down-moves and How it depicts psychology Moving Averages Concepts Interpretations Bands Trading with Bollinger Bands Pivots, Median and Fibonacci Applications Momentum Principles Trading with Oscillators: RSI, MACD, Stochastics Integrating Technical Tools Trading strategies Entry and Exit Rules, Support and Resistance, Stop Loss Techniques and Warning Bells Controlling Personal Emotions- Investment Psychology Elliot wave concepts and applications Futures market technical analysis tools Open Interest analysis General rule for a healthy price trend on a futures charts Summary Other important aspects of Treasury management Accounting policy formation (for various treasury transactions) and its role in treasury management Accounting standards on various treasury transactions (for derivatives trading, forex trading, securities trading etc.) Fair value accounting Taxation issues Other legal and regulatory issues 9