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Introduction to financial management

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FINANCIAL MANAGEMENT
NATURE AND SCOPE - AN INTRODUCTION

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Introduction to financial management

  1. 1. WINTERTemplateNATURE & SCOPE OF FINANCIAL MANAGEMENT 01 MODULE 1 Submitted by, ABDUL MANAF AMAL P ROOPESH V NAMBOODIRI PRIYESH P VISHNU K KUMAR SATHEESH KUMAR S STEJI JOHNY SAJANA P.A SARI V.S ROSE MARY V.A
  2. 2. 02 BUSINESS FINANCE Business activity which is concerned with the acquisition and conservation of capital funds in meeting the financial needs and overall objectives of business enterprise. - B.O Wheeler Activity concerned with the planning, raising, controlling and administering the funds used in the business. - Guthumann & Dougall
  3. 3. 03 Financial Management The area of business management devoted to a judicious use of capital and a careful selection of sources of capital in order to enable a spending unit to move in the direction of reaching its goals. - J.F. Bradely Operational activity of a business that is responsible for obtaining and affectively utilising the funds necessary for efficient operations. - J.L Massie
  4. 4. 04 Importance of Financial Management • Financial planning & successful promotion of enterprise • Acquisition of funds as & when required at minimum possible cost. • Proper use and allocation of funds. • Taking sound financial decisions. • Improving the profitability through financial controls. • Increasing the wealth of investors & the nation. • Promoting & mobilising individual and corporate savings.
  5. 5. 05 Finance Function The Process of acquiring and utilizing funds of a business. - R.C Osborn Financing consists of raising, providing, managing of all the money, capital or funds of any kind to be used in connection with the business. - Bonneville & Dewey
  6. 6. WINTERTemplate 06 Aims of Finance Function 1. Acquiring Sufficient funds 2. Proper Utilisation of funds 3. Increasing profitability 4. Maximising firms value
  7. 7. 07 SCOPE OF FINANCE FUNCTION 1. Estimating financial requirements 2. Deciding capital structure 3. Selecting a source of finance 4. Selecting a pattern of investment 5. Proper cash management 6. Implementing financial controls 7. Proper use of surpluses
  8. 8. 08 Objectives of financial management 1.Profit Maximisation Profit is the main aim of every economic activity. Arguments in favour of profit maximisation as the objective of business:-  When profit earning is the aim of business then profit maximisation should be the objective. • Profitability is a barometer for measuring efficiency and economic property of a business enterprise. • Economic and business conditions do not remain same at all the times. • Profits are the main source of finance for the growth of the business. • Profitability is essential for fulfilling social goals also.
  9. 9. 09 • Economic and business conditions do not remain same at all the times. • Profits are the main source of finance for the growth of the business. • Profitability is essential for fulfilling social goals also. 2.Wealth Maximisation Financial theory asserts that wealth maximisation is the single substitute for a stockholder’s utility. When the firm maximises the stockholder’s wealth, the individual stockholder can use this wealth to maximise his individual utility.
  10. 10. 10 FINANCIAL DECISIONS 1.Investment decisions investment decision related to the discrimination of total amount of assets to be held in the firm, the composition of these assets and the business risk complexions of the firm as perceived by its investors. 2.Financing decisions Once the firm has taken the investment decision and committed it self as new investment, it must decide the best means of financing these commitments. A financial manager has to select such source of funds which will make optimum capital structure.
  11. 11. WINTERTemplate 11 3.Divident decisions The third major financial decision relates to the disbursement of profits back to investors who supplied capital to the firm. Dividend is the reward of shareholder for investments made by them in the share capital of the company.
  12. 12. 12 Functions of finance manager • Financial forecasting and planning • Acquisition of funds • Investment of funds • Helping in valuation decision • Maintain proper liquidity

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