Finance Functions

1. SHIVAJI UNIVERSITY
KOLHAPUR
Name: harshal dagaji patil
Present seminar on-
Finance Functions
Under the Guidance-
B . Patil .

2. FINANCE FUNCTIONS
It may be difficult to separate the finance
functions from production, marketing and other
functions, but the functions themselves can be
readily identified. The functions of raising funds,
investing them in assets and distributing returns
earned from assets to shareholders are
respectively known as financing decision,
investment decision and dividend decision.

3. Finance functions
1. Long-term asset-mix or
investment decision
2.Capital-mix or financing decision
3.Profit allocation or dividend
decision
4.Sort-term asset-mix or liquidity
decision

4. Investment Decision
A firm's investment decisions involve capital
expenditures. The are, therefore, referred as capital
budgeting decisions. A capital budgeting decision
involves the decision of allocation of or commitment
of funds to long-term assets that would yield benefits
(cash flows) in the future. Future benefits of
investments are difficult to measure and cannot be
predicted with certainty Risk in investment arises
because of the uncertain returns.

5. Financing Decision
Financing decision is the second important function
to be performed by the financial manager. Broadly,
he or she must decide when, where from and how to
acquire funds to meet the firm's investment needs.
The central issue before him or her is to determine
the appropriate proportion of equity and debt. The
mix of debt and equity is known as the firm's capital
structure.

6. Dividend Decision
Dividend decision is the third major financial
decision. The financial manager must decide
whether the firm should distribute all profits, or retain
them, or distribute a portion and retain the balance.
The proportion of profits distributed as dividends is
called the dividend-payout ratio and the retained
portion of profits is known as the retention ratio.

7. Liquidity Decision
Investment in current assets affects the firm's
profitability and liquidity. Lack of liquidity in extreme
situations can lead to the firm's insolvency. A conflict
exists between profitability and liquidity while
managing current assets. If the firm does not invest
sufficient funds in current assets, it may become
illiquid and therefore, risky. But it would lose
profitability as idle current assets would not earn
anything.

8. Thank you