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Financial management and its scope
- 1. Financial management and its scope Tejas V
- 2. Definition β’ Planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. β’ Objectives 1. Maximizing overall wealth 2. Meeting expenses 3. Investing in assets 4. Increasing profit to share holders
- 3. Scope 1. Investment decisions β’ Capital budgeting. β’ Investment in current assets are also a part of investment decisions called as working capital decisions. 2. Financial decisions β’ Raising of finance from various resources which will depend upon decision on type of source, period of financing, cost of financing and the returns thereby.
- 4. Scope 3. Dividend decisions β’ Net profits distribution β’ Dividend for shareholders β’ Retained profits 4. Asset management decisions β’ Manage assets efficiency
- 6. Functions 1. Estimation of capital requirements 2. Determination of capital composition 3. Choice of sources of funds 4. Investment of funds 5. Disposal of surplus 6. Management of cash 7. Financial controls
- 7. Thank You
Editor's Notes
- It means applying general management principles to financial resources of the enterprise. Planning obtaining and managing company funds to accomplish its objectives
- βΊ What is the optimal firm size? βΊ What specific assets should be acquired? βΊ What assets (if any) should be reduced or eliminated? 2 βΊ Determine how the assets (LHS of balance sheet) will be financed (RHS of balance sheet).What is the best type of financing? What is the best financing mix? What is the best dividend policy (e.g., dividend payout ratio)? βΊ How will the funds be physically acquired?
- 1.Retained profits depend on expansion and diversification of enterprise 2.Emphasize on current asset(Short term asset)Management than fixed asset
- 1.For the company 2. Meet the expectation of shareholders 3.Use funds maximum possible way at least cost and safety of investment 4.Balance between debt and equity capital
- Estimation to increase earning capacity of enterprise The capital structure have to be decided. This involves short- term and long- term debt equity analysis. 3. a.Issue of shares and debentures Loans to be taken from banks and financial institutions 4. decide to allocate funds into profitable ventures so that there is safety on investment and regular returns is possible. Dividend and retained earnings cash is required for many purposes like payment of wages and salaries, payment of electricity and water bills, payment to creditors, meeting current liabilities, maintainance of enough stock, purchase of raw materials, etc. The finance manager has not only to plan, procure and utilize the funds but he also has to exercise control over finances. This can be done through many techniques like ratio analysis, financial forecasting, cost and profit control, etc. CONCL Financial management ensures a balance between outflow and inflow of funds so that stability is maintained