Documentos de Académico
Documentos de Profesional
Documentos de Cultura
Dr. Marc
Faber
concluded
his monthly
bulletin (June
2008) with
the
Following….
1
Introduction to
financial management
2
What Is Business
Finance?
Imagine you were to start your own
business.
you would have to answer the following
three questions.
3.What long-term investments should you
take on? That is, what lines of business will
you be in and what sorts of buildings,
machinery, and equipment will you need?
4.Where will you get the long-term financing
to pay for your investment?
5.How will you manage your everyday
financial activities such as collecting from
customers and paying suppliers? 3
These are not the only questions, but
they are among the most important.
Business finance,
broadly speaking, is the study of ways
to answer these three questions. We’ll
be looking at
each of them in the chapters ahead.
4
Classifications of financial
6
Definition
Business finance
Guthmann and dougall:-”
business finance can be broadly
defined as the activity concerned
with the planning, raising,
controlling and administering the
funds used in the business”.
7
Meaning of financial
management
Financial management is
application of principles of
management to the subject
called finance , it involves
planning, controlling decision
making with respect to finance
activity of the business.
8
The Four Basic Areas of
finance
•Corporate finance
•Investments
•Financial institutions
•International finance
9
Why Study Finance?
Marketing and finance
Budgets, marketing research, marketing
financial products
Accounting and finance
Dual accounting and finance function,
preparation of financial statements
Management and finance
Strategic thinking, job performance and
profitability
you and finance(personal finance)
Budgeting, retirement planning, college
planning, day-to-day cash flow issues 10
The Evolution of Financial Managem
13
Nature of financial
management
FM is an area of decision making in
finance function of the business.
It is descriptive/ theoretical/
statistical/ historical and analytical
in nature.
It involves application of
management principles to the
finance function.
It is applicable to every
organization irrespective of its size,
nature, place. 14
Continued…
It deals with accumulation and
utilization of financial
resources(business resources).
It is directed towards achieving
business objectives.
15
Scope of financial
management.
1.Estimating financial requirements
2.Deciding capital structure
3.Selecting source of finance
4.Selecting pattern of investment
5.Cash management
6.Profit management
7.Ensuring liquidity
8. Meeting statuary requirement.
16
Financial Management
Decisions
Investment decision
Financial decision
Dividend decision
17
Objectives of financial
management
2)Wealth Maximization
18
1) Profit maximization
When profit-earning is the main aim
then its maximization should be
obvious.
Profitability is a barometer for
measuring efficiency and economic
prosperity of a business enterprise.
Profits fuel business growth. So
business should maximize profit to
ensure strong growth.
Business risks are unavoidable as
well as uncertain.
All other business goals (social goals
can be meat only with adequate
profits)so it should be maximized. 19
Criticisms of profit
maximization
Profit maximization ignores time value of
money.
Profit maximization does not take into
account the risk involved in prospective
earnings.
It would lead to inequalities and loss of
human values which are essential to a
society.
Today's market is characterized by
imperfect competition in this scenario,
profit maximization can not be the
obvious objective of the business.
The term profit itself is not precisely
defined, it can be short term/long term or 20
2) Wealth
maximization
Wealth maximization means
maximizing share/stock holders wealth.
symbolically
Current
share holder’s = no of shares
stock ×
price
wealth owned per share
21
Factors in favor of wealth
maximization
It serves the interests of creditors,
employs, shareholders and society.
Wealth maximization adds to
productivity and efficiency of the
firm.
It minimizes the conflict between
share holders and management of
the company.
Wealth maximization takes into
account time value of money.
the objective helps in increasing 22
Criticisms of wealth
maximization
It is prescriptive idea. It is not
descriptive of what firms actually
do.
Wealth maximization is not
necessarily socially desirable.
There is some controversy as to
whether the objective is to
maximize shareholders wealth or
firms wealth(since debenture
holders, preferential holders also 23
Quick
Quiz...
24
1.What is the goal/objective
of financial management?
A. Profit maximization and wealth
maximization
26
2. What are the four basic
areas of finance?
A. Business finance, share
market, domestic finance and
investments.
B. Corporate finance,
investments, financial
institutions and international
finance.
28
3. What are the three
types of financial
management decisions
A. Capital budgeting, capital
structure and working capital
management.
30
4. Who is the present CFO
of INFOSYS
A. NANDAN NEELEKANI
C. VIBIN BALAKRISHNAN
D. SUDHA MURTHY
31
C. VIBIN BALAKRISHNAN
32
5. Name any five
financial institutions.
33
6. Who is the present
finance minister of INDIA
A. Manmohan singh
B. Mranab mukarji
C. P. chidhambaram
34
A. Manmohan singh
35
THANK YOU…..
Sunil RNSIT,
Bangalore
36