Management of Finance

1. Management of Finance
PROF. DHAVAL BHATT

2. Course Objective
• To acquire the skills necessary to manage a financial firm, to
describe and apply financial concepts, theories, and tools, and
to evaluate the Financial Performance.
• Enhancing student’s ability to understand time value of money,
capital investment decisions, financing decisions, dividend
policy, capital structure applicable for the achievement of
organizational goals.
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3. Course Topics
• Introduction to Management of Finance
• Financial Statements
• Analysis of Financial Statements
• Ratio Analysis
• Capital Structure Theories
• Leverages
• Cost of Capital
• Capital Budgeting
• Working Capital Management
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4. Course Topics
• Investment and Risk
• Risk Analysis, Evaluation
• Portfolio Theory
• Sensitivity and Decisions Tree Approach
• Foreign Exchange
• Types of Foreign Exchange Rate
• Foreign Exchange Risk
• Identifying and measuring exchange rate exposure risk
• Techniques to reduce exposure
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5. Traditional Approaches to Financial
Management
• According to this approach, the scope of the finance function is restricted
to “procurement of funds by corporate enterprise to meet their
financial needs”.
• The term “procurement” refers to raising of funds externally as well as
the interrelated aspects of raising funds.
• The interrelated aspects are the institutional arrangement for finance,
financial instruments through which funds are raised and legal and
accounting aspects between the firm and its sources of funds.
• In traditional approach the resources could be raised from the
combination of the available sources
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6. Modern Approaches to Financial Management
• The modern approach is an analytical way of looking into financial
problems of the firm.
• According to this approach, the finance function covers both
acquisition of funds as well as the allocation of funds to various
uses.
• Financial management is concerned with the issues involved in
raising of funds and allocating these funds effectively and wisely.
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7. Objectives of Financial Management
• To ensure regular and adequate supply of funds to the concern.
• To ensure adequate returns to the shareholders which will depend
upon the earning capacity, market price of the share, expectations of
the shareholders.
• To ensure optimum funds utilization. Once the funds are procured,
they should be utilized in maximum possible way at least cost.
• To ensure safety on investment, i.e, funds should be invested in safe
ventures so that adequate rate of return can be achieved.
• To plan a sound capital structure-There should be sound and fair
composition of capital so that a balance is maintained between debt
and equity capital.
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8. Functions of Financial Management
• Estimation of capital requirements
• Determination of capital composition
• Choice of sources of funds
• Investment of funds
• Disposal of surplus
• Management of cash
• Financial controls
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9. Profit Maximization VS.
Wealth Maximization
• Profit maximization is the process by which a business arranges its
prices and cost structure to achieve the highest possible profit. The
central goal of the organization is to increase its profits.
• Wealth maximization is the concept of increasing the value of a
business in order to enhance the value of the shares held by its
stockholders. This may involve additional investments in intellectual
property and strategic positioning, as well as attention to managing
the risk profile of a business.
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