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Financial management.docx


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Financial management.docx

  2. 2. FINANCE Finance is the life-blood of business. Without finance neither any business can be started nor successfully run . Finance is needed to promote or establish business, acquire fixed assets, make necessary investigations, develop product keep man and machines at work ,encourage management to make progress and create values.
  3. 3. FINANCIAL MANAGEMENT Financial management is one thefunctional area of management. It refer to that part ofthe management activity which is concerned with theplanning and controlling of firms financial resources. “Financial management is the application of planning and control function of the finance function” Howard and Upton
  4. 4. AREA OF FINANACIAL MANAGEMENT Investment analysis Working capital management Optimum utilization of resource Wealth maximization Dividend policy Analysis and risk Use of funds Financial decision
  5. 5. TRADITION AND MODERN CONCEPTThe tradition approach of business finance is concernwith raising of funds used in an enterprise.The modern approach lays emphasis not only on theraising of funds but also on their efficient utilization.
  6. 6. Objective of financial management Wealth maximization profit maximization Increase share holders
  7. 7. Scope of financial management Financial management and economic Financial management and accounting Financial management and mathematics Financial management and production management Financial management and marketing Financial management and human resource
  8. 8. Function of financial management Financial planning Acquisition of funds Proper use of funds Financial decision Increase the value of the firm Promoting saving
  9. 9. Function of financial manger Forecasting financial requirements Acquisition necessary capital Investment decision Cash management Other department
  10. 10. Types of financial decision Financial decision Dividend decision Investment decision
  11. 11. Financial decision Financing decisions - How should the company payfor the investments it makes? This determines the right-hand side of the balance sheet. it is also known as capitalstructure decision. It involves the choosing the best source ofraising funds and deciding optimal mix of various source offinance
  12. 12. Dividend decision Dividend decisions - What should be done with the profits of the business? The dividend decision is concerned with determining how much part of the earning should be distributed among the share holders by way of dividend and how much should be retained in the business for meeting the future needs of funds internally.
  13. 13. Investment decision What assets should the company hold? This determines the left-hand side of the balance sheet. these decision are concerned with the effective utilization of funds in one activity or the other. The investment decision can be classified under two groups- (i) Long term investment decision (ii) Short term investment decision The former are referred to as the capital budgeting and the latter as the capital budgeting and the latter as working capital management.
  14. 14. Financial environment Macro environment Micro environment