Overview of Financial Management By: Prof Amar Gupta, MITCOM
Overview of Financial Management <ul><li>Q. What is Finance? </li></ul><ul><li>Ans: </li></ul><ul><li>Finance is the art and science of managing money. </li></ul><ul><li>Finance is concerned with the Process, Institutions, Markets and Instruments involved in the transfer of money among Individuals, Organisations and Governments. </li></ul>
Classification of Finance FINANCE Public Finance Private Finance Govt Institutions State governments Local Self-Governments Central Government Personal Finance Business Finance Finance for Non-Profit Organizations
Meaning of Business Finance <ul><li>Finance of business activities. </li></ul><ul><li>All creative human activities relating to the production and distribution of goods and services for satisfying human wants are known as business . </li></ul><ul><li>Finance may be defined as the provision of flows of money at the time when it is required. </li></ul><ul><li>Business finance is an activity or process which is concerned with acquisition of funds, use of funds, and distribution of profits by a business firm. </li></ul>
FINANCIAL MANAGEMENT <ul><li>Financial management is referred to that part of management which is concerned with the planning and controlling of firm’s financial resources. </li></ul><ul><li>It deals with finding various sources for raising funds for the firm and allocation of funds and thus aiming at maximising the profit earning capacity of the organisation and also its wealth. </li></ul><ul><li> F.M. is Concerned with Decision Making </li></ul><ul><li>This decision is concerned with the size and composition of assets and the level and structure of financing. </li></ul>
Objectives of Financial Management <ul><li>Profit Maximization </li></ul><ul><li>Wealth Maximization </li></ul>
Profit Maximization <ul><li>Profit maximization is considered as the goal of financial management. In this approach, actions that Increase profits should be undertaken and the actions that decrease the profits are avoided. </li></ul>
Wealth Maximization <ul><li>Wealth maximization decision criterion is also known as Value Maximization or Net Present-Worth maximization. </li></ul>
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