Management- Financial management Finance is a life-blood for an organisation. Without finance the business neither started nor survive. Capital structure Cost of capital leverage

1. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Affiliated Institution of G.G.S.IP.U, Delhi
Financial management
Paper ID-17309
Paper code-BBA309

2. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
FINANCE.....
Finance is a life-blood for an organisation.
Without finance the business neither started nor
survive.
Need:
To run a business.
For input operations.
For managerial activities
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3. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
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Financial management is
concerned with raising financial
resources and their effective
utilization towards achieving
organisational goals.
Financial management

4. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Subject studied in :
BBA (G) ,Fifth semester (309)
Objective: Efficient management of a business enterprise is closely linked with the
efficient management of its finances. Accordingly, the objective of the course is to
acquaint the students with the overall framework of financial decision- making in a
business unit.
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5. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Syllabus of Financial management
 Unit one
 Meaning, scope, objectives of financial management
Profit vs wealth maximization
Methods of financial management
Sources of finance
Concept in valuation
 Unit two
Capital structure
Cost of capital
leverage
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6. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Unit three
Capital budgeting
Unit four
Working capital management
Dividend policy
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7. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
SCOPE OF FINANCIAL MANAGEMENT
• Estimating financial requirements.
• Deciding capital structure (i.e. the sum of equity,
preference, debentures, retained earnings and
loan)
• Selecting a source of finance.
• Selecting a pattern of investment.
• Proper cash management.
• Implementing financial control.
• Proper use of surpluses.
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8. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Objective of financial management
Profit maximization
Wealth maximization
Proper estimation of total financial
requirements
Proper mobilization of finance
Proper utilization of finance
Maintaining proper cash flows
Reduce cost of capital
Reduce operating risk
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9. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Role of The Financial Manager
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Financial
manager
Firm's
operations
Financial
markets
(1) Cash raised from investors
(1)
(2) Cash invested in firm
(2)
(3) Cash generated by operations
(3)
(4a) Cash reinvested
(4a)
(4b) Cash returned to investors
(4b)

10. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Organisation of the Finance Functions
• Reason for placing the finance functions in
the hands of top management
– Financial decisions are crucial for the survival of
the firm.
– The financial actions determine solvency of the
firm
– Centralisation of the finance functions can result in
a number of economies to the firm.
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11. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Status and Duties of Finance Executives
• The exact organisation structure for financial
management will differ across firms.
• The financial officer may be known as the financial
manager in some organisations, while in others as the
vice-president of finance or the director of finance or
the financial controller or CFO.
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12. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Role of Treasurer and Controller
• Two more officers—the treasurer and the
controller—may be appointed under the direct
supervision of CFO to assist him or her.
• The treasurer’s function is to raise and manage
company funds while the controller oversees
whether funds are correctly applied.
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13. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Finance Functions
• Investment or Long Term Asset Mix Decision
• Financing or Capital Mix Decision
• Dividend or Profit Allocation Decision
• Liquidity or Short Term Asset Mix Decision
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14. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Financial Goals
• Profit maximization (profit after tax)
• Maximizing Earnings per Share
• Shareholder’s Wealth Maximization
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15. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Profit Maximization
• Maximizing the Rupee Income of Firm
– Resources are efficiently utilized
– Appropriate measure of firm performance
– Serves interest of society also
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16. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Objections to Profit Maximization
• It is Vague
• It Ignores the Timing of Returns
• It Ignores Risk
• Assumes Perfect Competition
• In new business environment profit
maximization is regarded as
– Unrealistic
– Inappropriate
– Immoral.
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17. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Maximizing EPS
• Ignores timing and risk of the expected benefit
• Maximizing EPS implies that the firm should
make no dividend payment so long as funds can
be invested at positive rate of return—such a
policy may not always work
• Market value is not a function of EPS. Hence
maximizing EPS will not result in highest price
for company's shares
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18. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Shareholders’ Wealth Maximization
• Maximizes the net present value of a
course of action to shareholders.
• Accounts for the timing and risk of the
expected benefits.
• Benefits are measured in terms of cash
flows.
• Fundamental objective—maximize the
market value of the firm’s shares.
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19. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Objective - maximize the stock price
• easily observable
• stock prices reflect the wisdom of decisions,
short term and long term, instantaneously.
• The stock price is a real measure of
stockholder wealth, since stockholders can
sell their stock and receive the price now
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20. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
•THANK YOU