The presentation cover Introduction to Financial Management covering the objectives, scope, evolution and functions.

1. Chapter 1
INTRODUCTION
BY
SUKU THOMAS SAMUEL
Department Of Management

2. What is Finance?
Management of Finance is called as Finance
Finance
Personal
finance
Public
finance

3. Ministry of Finance
• Responsible of managing fiscal policy of the country.
• Prepares the Union budget.
• Divided into 5 major departments:
1. Department of Expenditure
2. Department of Revenue
3. Department of Financial Services
4. Department of Investment and Public Asset Management
5. Department of Economic Affairs

4. Definition
Financial Management means planning, organizing, directing and
controlling the financial activities such as procurement and utilization
of funds of the enterprise.
• Planning
• Organizing
• Directing
• Controlling
- Set goal/objective
- Raise Money
- Utilize Money
- Sustain

5. Evolution of Finance
 Branch of Economics
Adam Smith – Wealth of Nations
Management of Economic
resources
Money = Resource
Finance Management = Money
Management

6. Evolution of Finance
 Evolution of Finance from economics has 4 major phases
A. Traditional phase.
B. Transitional phase.
C. Modern phase.
D. Post modern phase.

7. Evolution of Finance
Traditional Phase
1920’s – 1950’s
Corporate finance – Financing corporates
Raising funds
Source of fund
Instrument of fund
Emphasis was on capital formation
Outsiders view point

8. Evolution of Finance
Transitional Phase
1940’s – 1950’s
Focus on day to day issues
Modern Phase
4 major areas of decision making
Post Modern Phase
Globalisation

9. Function of Financial Management
 Financing Decision
Raising funds
 Investment Decision
Spending funds
 Working Capital Management
Money for day to day activities
 Dividend Decision
Distributing profit

10. Objectives of Finance
Profit Maximization
 Increase profit
 Maximize output
 Minimize cost
 Profit = Sales - expense
Wealth Maximization
 Increase shareholders wealth
 Maximize market share
 Improve branding

11. Profit Maximization
 Purpose to earning profit
 Also know cashing per share maximization
 Considers all the possible ways to increase the profitability
 Efficiency is measured in terms of profit
 Reduce the risk of the business
Limitations
– Ignores the time value of money
– Over exploitation of resources
– Ignores risk

12. Wealth Maximization
 Also known as value maximization
 Provides efficient allocation of resources
 Ensures the economic interest of the society
 Considers both time and risk of the business concern
Limitations
Form of indirect profit maximization
Ownership-management conflicts
Management alone enjoy certain benefits

13. Organization of Finance
Shareholders
Board of Directors
CEO
VP –
Marketing
VP –
Operations
VP – Finance
Treasurer Controller
VP – HR

14. Organization of Finance
TREASURER
 Cash Management
 Credit Management
 Banking Management
 Portfolio Management
CONTROLLER
 Accounting
 Audit
 Budgeting
 Taxation

15. Functions of Financial Manager
 Forecasting Financial Requirements
 Acquiring Necessary Capital
 Investment Decision
 Cash Management
 Interrelation with Other Departments