Introduction to
Financial Management
By Ricky MA
Learning Objectives
O What are the main functions of financial
management?
O What is the main purpose of good financial
ma...
Functions of FM
O 3 Main Functions
O Investment decision
O Select investments with highest return
O Financing decision
O T...
Investmen
t
Decision
Financing
Decision
Dividend
Decision
• Net Present Value
• Internal Rate of Return
• Payback
• ROCE/R...
Purpose of FM
Corporate
Objectives
Purpose of FM (Cont’d)
O To achieve primary financial objective
O Maximize shareholders’ wealth
O Max. (Dividend + Share P...
Role of CFO
O To perform 3 basic FM functions
(Strategic)
O Investment/Financing/Dividend decision
O To monitor treasury o...
Stakeholders’ Interests
O Who are the stakeholders?
Stakeholder Objectives
Shareholders Profit/personal wealth maximizatio...
Stakeholders’ Interests (Cont’d)
O Conflict of interests among stakeholders?
O Shareholders vs. Management
O Agency proble...
Not-for-Profit Organization
O The concept of “Value for Money”
O Benchmarks for measurement (3E)
O Efficiency (inputs vs. ...
FAQs
O What are the main functions of financial
management?
O What is the primary financial objective?
O Please identify t...
Any Questions?
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Introduction to financial management

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Introduction to financial management

  1. 1. Introduction to Financial Management By Ricky MA
  2. 2. Learning Objectives O What are the main functions of financial management? O What is the main purpose of good financial management? O What is the role of a CFO? O What are stakeholders’ interests? O Is it different for Not-for-Profit organization?
  3. 3. Functions of FM O 3 Main Functions O Investment decision O Select investments with highest return O Financing decision O Take financing options with lowest cost O Dividend decision O Retain sufficient resources for development and satisfy the investors
  4. 4. Investmen t Decision Financing Decision Dividend Decision • Net Present Value • Internal Rate of Return • Payback • ROCE/ROE/ROI • APV • MIRR • Probability Analysis • Sensitivity Analysis • Capital Rationing • Sources of finance • Cost of capital • CAPM • Dividend Growth Model • Capital structure • Risk management • Hedging strategies • Dividend policies • Dividend capacity • Residual Theory • Signalling effect • Clientele effect • Special dividend • Share repurchase
  5. 5. Purpose of FM Corporate Objectives
  6. 6. Purpose of FM (Cont’d) O To achieve primary financial objective O Maximize shareholders’ wealth O Max. (Dividend + Share Price) O Max. profitability O How to get there? O Earn highest return from investments O Get lowest cost of financing O Execute adequate planning & control O Achieve maximum profits
  7. 7. Role of CFO O To perform 3 basic FM functions (Strategic) O Investment/Financing/Dividend decision O To monitor treasury operations (Routine) O Working capital management O Funding management O Risk management O To prepare management reporting (Periodic) O Cost measurement O Performance measurement
  8. 8. Stakeholders’ Interests O Who are the stakeholders? Stakeholder Objectives Shareholders Profit/personal wealth maximization Creditors Capital repayment Employees Salaries/work safety General public Social responsibilities Environment Emission/pollution control
  9. 9. Stakeholders’ Interests (Cont’d) O Conflict of interests among stakeholders? O Shareholders vs. Management O Agency problem O Share option scheme O Shareholders vs. Creditors O Risk attitude O Loan covenants O Shareholders vs. General public O Non-financial objectives O Social responsibility
  10. 10. Not-for-Profit Organization O The concept of “Value for Money” O Benchmarks for measurement (3E) O Efficiency (inputs vs. outputs) O Effectiveness (outputs vs. objectives) O Economy (inputs at the lowest cost)
  11. 11. FAQs O What are the main functions of financial management? O What is the primary financial objective? O Please identify the interests of various stakeholders and potential conflicts. O How to evaluate the performance of a Not-for- Profit organization?
  12. 12. Any Questions?

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