The document provides an overview of basics of finance including: 1) The objectives of corporate finance such as profit and wealth maximization. 2) The financial management process which involves financial planning, decision making, and control. 3) The difference between ownership and control in corporations and potential agency problems. 4) Factors that influence financial decisions such as the business environment, economy, and internal factors. 5) The scope of corporate finance which includes areas like capital budgeting, financing, and working capital management.

1. Basics of Finance
Raju Indukooori

2. Dr Raju Indukoori
Content
A. Objectives of Corporate Financial Management
B. Financial Management Process
C. Ownership Vs Control
D. Factors influencing financial Decision
E. Scope of Corporate Finance
F. Finance Verticals
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3. A. OBJECTIVES OF COPORATE FINANCE

4. Dr Raju Indukoori
A. Corporate Financial Management Objectives
Profit maximization
• Maximization of EPS
• Maximizing dividend
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Wealth maximization
• Maximizing firm value
• Maximizing stock value

5. B. FINANCIAL MANAGEMENT PROCESS

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B. Financial Management Process
1. Financial Planning
2. Financial Decision Making
3. Financial Control
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7. Financial Management Process
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Financial Objectives
Strategic Objectives
Financial Planning
Financial Decisions
Financial Control
Profit or Wealth
Maximization

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1. Financial Planning
• Identifying Finance Needs
• Assessing the sources
• Estimating costs associated in raising
• Cost of capital
• Evaluating financial risk
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9. Dr Raju Indukoori
2. Financial Decision Making
Financing/ funding/ Capital Formation
• Acquisition of funds
• Utilization of funds
• Capital Structure : Debt / Equity
• Leasing
Investment Function
• Financial feasibility
• Capital Budgeting
• Capital rationing
• Choice of Assets
Liquidity Function
• Working capital management
• Inventory Management
• Cash Management
• Receivables Management
• Payables Management
Dividend Function
• Dividend distribution
• Retained Earnings
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10. Dr Raju Indukoori
3. Financial Control function
• Budgets
• Performance measurement
• Matching plan and the performance
• Necessary action in case of – ve deviation
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11. C. OWNERSHIP VS CONTROL

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Agency Problems
• Owners: Shareholders
• Agent : Management as the agents of owners
– Act as shareholders best interests.
– Make decisions at the optimal interest of share holders
Agency problems arise when management works for their
own benefits like salary, perks, incentives…
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13. Ownership Vs Control
Dr Raju Indukoori
Board of Directors
Management
Assets
Debt
Equity
Shareholders
Debtholders

14. Finance Hierarchy
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CEO
BOD
CFO HR Head Production and
Operations Head
Sales & Marketing
Head
Financial Controller
•Internal Control
•Budgets
•Financial statements preparation
•Financial forecasting
•Cost accounting and management
•Legal / Government compliance
Treasurer
•Financing
•Cost of capital and Capital Structure
•Liquidity
•Investments
•Dividends
•Risk Management
Owners / Share Holders

15. D. FACTORS INFLUENCING FINANCIAL DECISIONS

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FACTORS INFLUENCING FINANCIAL DECISIONS
External
• Business Environment
• State of the Economy
• Money market
• Capital markets
• Source of Capital
• Investors objectives
• Policy of Government
• Taxation
• Policy of Banks & Financial
Institutions
Internal
• Nature of business
• Size of the business
• Earnings
• Expected return
• Cost of capital
• Risk of capital
• Structure of Capital
• Ownership structure
• Composition of assets
• Age of the firm
• Liquidity position
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17. E. SCOPE OF CORPORATE FINANCE

18. Scope of Corporate Finance
1. Capital Budgeting
2. Funding / Financing / Sources of Capital
3. Financial Leverage
4. Capital Structure
5. Cost of Capital
6. Dividends / Retained Earnings
7. Working Capital Management / Liquidity Management / ST Funding
8. Accounting for Managers / Financial Accounting / Financial Statement
Analysis
9. Risk – Return Analysis
10. Valuation
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19. Finance Verticals
Traditional Finance
1. Corporate Finance
2. Investments
3. Banking
4. Insurance
5. Derivatives / Hedging
6. Financial Statement Analysis
7. Mergers and Acquisitions
8. International Finance
9. Financial Markets
10. Financial Services
Modern Finance
1. Asset Pricing
2. Financial Planning
3. Micro finance / Micro Credit
4. Behavioral Finance
5. Wealth Management
6. Fixed Income Securities
7. Asset Backed Securities
8. Bit Coin and Block Chain
9. Corporate Valuation
10. Financial Risk Management
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20. Any Questions ?

21. Dr Raju Indukoori
Post Session Activities
1. Differentiate Finance Functions in Manufacturing
Companies and in Software Companies.
2. Trace CFO of various corporations of your choice and find
their financial goals.
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22. Thank You