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1. Financial Management as for JNTUA
Financial Management UNIT-1
Nature of Financial Management
Economics
Economics (Micro and Macro)
Finance Management
SCOPE OF FINANCIAL MANAGEMENT
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Production
Economics (Environmental factors)
Marketing (Promotional Cost)
Human Resource (Financial Remuneration)
Research Management (Finance allocation)
Cost Decisions (Resources Cost)
Operations Research (event Cost mgt.)
Accounting Analysis (Accounting reports)
Government Policies &Procedure (Tax. Ext.)
FINANCIAL FUNCTIONS
1) Executive Functions
Financial Forecasting Investment
Decision Corporate Asset Structure
The Management of Income
Management of Cash
New Sources of Finance
Negotiations of financing
Analysis of Financial Performance
Advising Top Management
2) Routine Functions
Record Keeping and Reporting
Preparation of Financial Statement
Cash Planning
Credit Management
Managing Financial Securities
Financial Policy Decision
ROLE OF FINANCE MANAGER
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1)Financial Planning
2)Funds Raising
3)Funds Allocations
4)Profit Planning
5)Understanding Capital Market
B R Murthy Assistant Professor, GVIC-Madanapalli. Page 1

2. Financial Management as for JNTUA
GOALS OF FINANCE MANAGER
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1)Time value of money
2)Risk & Return Method
3)Uncertainty of Return
4)Profit Maximization
5)Wealth Maximization
Unit-2
IMPORTANT OF INVESTMENT DECISION:
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Growth
Risk
Funding
Complexity
INVESTMENT DECISION
PROCESS:
Investment Opportunity
Portfolio Screening
Analysis
Group Decision with Portfolio Team
Investment Committee
Purchase Decision
Buy
Review
INVESTMENT EVALUATION TECHNIQUES:
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Traditional Method
Payback Method
Investment
Cash Inflows
Rate of return Method/Accounting rate of return Method
Average Cash Inflow X 100
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Original Investment
Modern Method/Discounting
Method
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Net Present Value Method
Internal Rate Of Return Method
Profit Index Method
B R Murthy Assistant Professor, GVIC-Madanapalli. Page 2

3. Financial Management as for JNTUA
TYPES OF PROJECT MANAGEMENT:
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Project Generation
Project Evaluation
Project Selection
Project Implementation
CASH MANAGEMENT/CASH
ESTIMATION:
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V
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Holding Cash Management
Factors Determining Level of Cash
Cash cycle
Tools of Cash Planning &Controlling
Functions of Cash Budget
UNIT-3
THE FINANCING DECISION
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SOURCE OF FINANCE:
Short term
Medium term
Long term
SHORT TERM FINANCE:
Commercial Papers
Bank over draft
Trade credit
Factoring
Advance from customers
Membership from customers
Internal fund
MEDIUM TERM FINANCE:
Bank loans
Hire purchases
Leasing/Renting
Venture capital
B R Murthy Assistant Professor, GVIC-Madanapalli. Page 3

4. Financial Management as for JNTUA
LONG TERM FINANCE:
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Own capital
Share capital
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CAPITAL STRUCTURE DECISION:
Components of capital structure
Objectives of capital structure
Determination of capital structure
EBIT/EPS Analysis
COST OF CAPITAL:
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Debt
Equity shares
Preference shares
Retain shares
Significance of cost
of capital:
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3.
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Evaluating Investment Decision
Designing a firm Debt Policy
Apprising the financial performance of top management
CONCEPT OF THE OPPORCHUNITY COST OF CAPITAL:
Share holders opportunities &values
Credit claim
Risk differences in share holders &creditors
Risk &Return Relationship
MODIGLINI &MILLER APPROACH
MM THEORY ASSUMPTION:
Capital market is assumed to be perfect
Investors are free to buy & sell securities
There are no Transaction cost
All Investors are only price takers
There are no personal &corporate tax
There is no benefit to debt financing
The debt is less expensive than equity
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Dividend Decision
B R Murthy Assistant Professor, GVIC-Madanapalli. Page 4

5. Financial Management as for JNTUA
Types of Dividend
On the Basis of Shares
Preference dividend
Equity Dividend
On the Basis of Time Payment
Interim Dividend
Regular Dividend
Special Dividend
On the Basis of Mode of Payment
Cash Dividend
Bond Dividend
Property Dividend
Composite Dividend
Types of Dividend Policy
Regular Dividend
Stable Dividend
Irregular Dividend
No Dividend Policy
Significance of Dividend Policy
Growth of the Company
The Value of the Firm Ability
to generate Income The
Decision to pay Dividend
Long term Financing Decision
The Market Price
Retaining Earnings
Dividend Valuation Theories
Residual Approach
MM Approach
Walter’s Model
Garden’s Model
Linter’s Model
B R Murthy Assistant Professor, GVIC-Madanapalli. Page 5

6. Financial Management as for JNTUA
UNIT-4
WORKING CAPITAL MANAGEMENT:
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Concept of working capital
Factors determine the working capital
Estimating working capital
Working capital policy
TYPES OF WORKING CAPITAL:
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Gross working capital
Net working capital
Permanent working capital
Temporary working capital
Semi-variable working capital
FACTORS DETERMING WORKING
CAPITAL:
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Nature of business
Production cycle
Business cycle
Credit policy
Growth & expansion
Earning capacity
Availability of raw material
ESTIMATION OF WORKING
CAPITAL:
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Components of working capital
Percentage of sales
Operating cycle
CASH MANAGEMENT
Significance of cash management:
1)
2)
Cash planning
Management of cash flows
B R Murthy Assistant Professor, GVIC-Madanapalli. Page 6

7. Financial Management as for JNTUA
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Management of optimum cash balance
Investment of excess cash
FACTORS DETERMING CASH MANAGEMENT:
Matching of cash flows
Cost of cash procurement
Cost of excess cash balance
Un certainty in business
Credit policy
Management attitude towards risk
TYPES OF CASH
MANAGEMENT:
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Cash budget management
Determine the optimum cash balance
Investing surplus cash
RECEIVABLES MANAGEMENT
Cost of maintaining receivables:
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Financing cost
Administrative cost
Cost of default by customers
FACTORS EFFECTING THE SIZE OF RECEIVABLES:
Stability of sales
Terms of sales
Credit sales
Credit period
Cash discount
Collection policies
Bills discounts & endorsement
INVENTORY
MANAGEMENT
Elements of Inventory management:
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Raw materials
Work in progress
Consumable
Finished goods for distribution
Store & spare’s
OBJECTIVIES OF INVENTORY MANAGEMENT:
B R Murthy Assistant Professor, GVIC-Madanapalli. Page 7

8. Financial Management as for JNTUA
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Minimizing the wastage
Promotion of manufacturing efficiency
Better services to customers
Control of production level
Optimum level of inventory
Availability of materials
INVENTORY MANAGEMENT
TECHNIQUES:
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Economic order quantity
ABC analysis
Re –order level
VED analysis
Just in time
UNIT-5
CORPORATE RESTRUCTURE
Corporate Restructure:
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Financial Restructuring
Technical Restructuring
Market Restructuring
Organizational Restructuring
Objectives of Corporate Restructuring:
Growth
Diversification
Optimum utilization of capacity
Improve competency
Cost Reduction
Economic of scale
MODES OF CORPORATE
RESTRUCTURING:
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Re organization
Mergers & Amalgamization
De mergers
B R Murthy Assistant Professor, GVIC-Madanapalli. Page 8

9. Financial Management as for JNTUA
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Acquisitions & Takeovers
Dis Investment
Joint Venture
TYPES OF MERGERS:
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Horizontal mergers
Vertical mergers
Co generic mergers
Un related mergers
Reverse mergers
Sick mergers
Cross border mergers
ECONOMIC RATIONALS FOR MERGERS:
Diversification
Globalization
Expansion
Technology
Refashioning
Customer Demand
Vertical Integration
APPROACHES FOR
VALUATION:
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Asset basis
Ratio valuation
Discounted cash flow Techniques
Inflation
Valuation of Bonds
MOTIVES FOR MERGERS:
A survey of US manufacturing firm identifying below motives.
A desire to utilize competition/to achieve monophonic profits.
A desire to tie together utilized market power.
A desire to response to increase opportunity for growth.
A desire to achieve a large economic of scale.
A desire to diversity to reduce risk of business.
A desire to overcome critical drawback in one own company.
B R Murthy Assistant Professor, GVIC-Madanapalli. Page 9

10. Financial Management as for JNTUA
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A desire to utilize more resources.
A desire to achieve goodwill.
A desire to run continuous growth.
A desire to utilize tax advantage.
A desire to move an existing management.
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PRINCIPLES OF GOOD CORPORATE GOVERNANCE:
Rights & Equitable treatment of shareholders
Interest of other stock holders
Roles &Responsibility of the board of directors & management
Integrity & Ethical behavior Discloser & Transparency
Integrity in financial reporting
B R Murthy Assistant Professor, GVIC-Madanapalli. Page 10