3. โข Meaning of Finance
โข Featuresof Finance
โข ScopeofFinance
โข Aimof Finance
โข Roleof FinanceManager (Traditional+ Modern)
โข Generalorganizational structureof Finance
Function
โข Importanceof Financein organizationthrough an
Example
4.
5. โข Financeisa management
of moneyandother
valuables, whichcanbe
easilyconvertedinto cash.
โข Financeisconcernedwith
the maintenanceand
creation of economicvalue
or wealth.
โข Asciencethat describes
the management,creation
andstudyof money,
banking,credit,
investments, assetsand
liabilities.
6. Features of Finance
โข Channelizingfunds-Financialsectorandfinancialmarkets
perform the essential function of channelingfundsfrom
people whohavesurplusto peoplewhohaveshortage.eg-
mutual fund
โข Acquisition,Allocation& Utilization of funds-Businessneeds
to decideabout modeof raisingfunds.oncefundsare
acquired,they haveto be allocated to variousprojects and
services.businessshouldensurethat the fundsare utilized
efficiently andeffectively to achieveits objectives.
โข Maximization of shareholderโswealth- Financehelpsin
defining policiesandefficient managementof working
capital in order to achieveits wealth maximization objective.
7. โฆcontinued
โข Future decisionmaking-Financeisconcernedwith
future decisionsof organization.Sounddecision
makingispossibleonlythrough proper analysisof
financial needsandavailability. E.g.-capital
budgeting
โข Optimal mixof funds-It isconcernedwith best
optimal mixof fundsin order to obtain desiredand
determined results.Thecompositionof fundsshould
not resultin loss.
โข Investment opportunities- Investment means
utilization of moneyfor profit or returns.eg-
investmentin mutual fund or financialsecuritiesor in
land, etc.
8. Scopeof Finance
โข Publicfinance- Todeal with governmental financial
problems,separateandspecializedfield of finance
hasemergedaspublicfinance with not for profit
goals.
โข Securityandinvestmentanalysis-Thisarea isof
interest to individual andinstitutional investors.It
coversmainlymeasurementof riskandreturn on
investmentin securities.
โข Institutional finance- It deals with issuesof capital
formation and the organizations that perform the
financingfunctionof the economy.eg- banks
9. โฆcontinued
โข International finance- It studieseconomic
transactions amongnations, corporations and
individually internationally. It isconcernedwith
flowsof moneyacrossinternationalboundaries.
โข Financialmanagement-Businessfirmsface
problemsdealing with acquisition of fundsand
optimum methodsof employing the funds.Thus,it
helpsfirm in seekinglow costfundsfor individual
firmsandseekprofitable business opportunities.
10. AIM OFFINANCEFUNCTION
โข Anticipation of fundsneeded- Beforeanything,
there isa needto evaluate available assetsand
projects. Selectionof assetsor projectstakesplace
only after proper evaluation, whichishelpful to
anticipate the fundsrequired for financing them.
โข Acquirethe anticipated funds-Theprime objective
of financefunction isto assessthe required needs
of a firm andthen arrangethe fundsneeded by
raisingfrom suitable source.
11. โฆcontinued
โข Allocationandutilization of funds-Efficient
allocation andutilization of fundsisthe objective
of traditional finance function. Efficient allocation
meansinvestingfundsonprofitable projectsand
suchoperationsthat help tomaximize
shareholderโs wealth.
โข Increaseprofitability- Properplanning andcontrol
of finance function aim at increasingprofitability of
the firm. It isimportant to arrangesufficient funds
at right time andonright asset.
โข Maximizing firmโsvalue- Everyfirm strivesto
maximizeits valuebytaking right decisions.Thus,it
isone of the mainobjectivesof finance function.
12.
13. New role of Financemanagerin
ContemporaryScenario
โข Financemanageractsascentral in audit andcontrol
practicesin an organization
โข Heactsascentral in strategicallianceslike Mergers&
Acquisitions.
โข Towork acrossthe functional divide of the company
andexhibit leadership skills.
โข Continuousfocusandcommitment towardsvalue
creation of an organization.
18. Imagine a situationโฆ
โข Youare the owner of ABCfirm andyouget 2
proposalsfor investingin a project that costsRs.5
lakhsandRs.8lakhsrespectively.Now there are
maximumthree moveswhichyoucanmakein this
situation-
1. Acceptboth
2. Reject both
3. Chooseeither of thetwo
19. Solution
โข Analyzethe data of bothproposals.
โข Apply several financial tools and techniqueson
the data available. Example- pay back period
technique.
โข Evaluate your findings.
โข Takedecision.
โข Make plan for acquiring, allocating and utilisingof
funds.
โข Implement plan.
โข Monitor allactivities.
