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1. Prepared
By
Arun Dixit
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2. Prepared
By
Arun Dixit
 Meaning of Basic Concept of Finance
 Financial Theory
 Features of Finance
 Financial Markets
 Money Market and Banking System
 Capital Market
 Valuation
 Market Efficiency
 Investment and Portfolio
Management
 Insurance Markets
 Real Estate Markets
 Scope of Finance
 Aim of Finance
 Role of Finance Manager
 General Organization Structure of
Finance Function
 Financial Landscape
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3. Prepared
By
Arun Dixit
 Finance is a management of money
and other valuables, which can be
easily converted into cash.
 Finance is concerned with the
maintenance and creation of
economic value or wealth.
 A science that describes the
management, creation and study of
money, banking, credit, investments,
assets and liabilities.
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4. Prepared
By
Arun Dixit
Financial theory is to be studied and developed within the disciplines of
management, (financial) economics, accounting and applied mathematics. Which
are as under;
 Financial Economics :- Financial economics is the branch of economics
characterized by a "concentration on monetary activities", in which "money of one
type or another is likely to appear on both sides of a trade"
 Financial Mathematics :- Financial mathematics, is a field of applied
mathematics, concerned with mathematical modeling of financial markets.
 Experimental Finance :- Experimental finance are to understand human and
market behavior in settings relevant to finance.
 Behavioral Finance :- Behavioral finance is the investors or managers affects
financial decisions and markets when making a decision that can impact either
negatively or positively on one of their areas.
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5. Prepared
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Arun Dixit
 Investment Opportunities :- An investment opportunity offers the option of
making a purchase or trade of something that has the potential of increasing in
value.
 Allocation and Utilization of Funds :- Financial management is the ways and
means of managing money. i.e. the determination, acquisition, allocation, and
utilization of financial sources usually with the aim of achieving some particular
goals or objectives.
 Diversify your Investment :- A best features of finance is to diversify your
investing funds and you may require additional finance for your diversification
needs.
 Financial Decision Making :- Financial decision is a process which is responsible
for all the decisions related with liabilities and stockholder’s equity of the
company as well as the issuance of bonds.
 Financial Management :- Financial Management means planning, organizing,
directing and controlling the financial activities such as procurement and
utilization of funds of the enterprise. It means applying
general management principles to financial resources of the enterprise.
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6. Prepared
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Arun Dixit
Financial Markets refers to a market place where buyers and sellers participate in the trade. It is
a platform that facilitates traders to buy and sell financial instruments / securities.
IMPORTANCE FUNCTIONS
• Helps in economic growth of country.
• Helps save to become investors.
• Helps business to raise money to expand their
business.
• Price Determination
• Mobilization of Funds
• Ensure Liquidity
• Saves Time and Money
TYPES
Name of Assets Stock, Bond, Commodity and Derivative Market
Nature of Claim Equity Market and Debt Market
Maturity of Claim Money Market and Capital Market
Delivery Timing Cash Market and Futures Market
Organizational Structure Exchange Traded Market and Over the Counter
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7. Prepared
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Arun Dixit
MONEY MARKET
 Money markets are markets that
provide short-term funding for banks
and other financial organizations.
The financial instruments used in
money markets may include deposits
& commercial paper for financial
agreements, such as car loans and
mortgages.
BANKING SYSTEM
 A banking system is a group or
network of institutions that provide
financial services for us. These
institutions are responsible for
operating a payment system,
providing loans, taking deposits, and
helping with investments.
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8. Prepared
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Arun Dixit
 SEBI Control the capital market.
 Money is available in huge quantities in capital market.
 Capital market deals with long term funds for 15-25 years.
 Preference share, equity share, debentures etc. are issued for raising capital.
 In capital market stock exchanges, U.T.I. financial corporations etc. performs the
transactions.
 The securities in capital market bear maximum or high risk.
 The scope of capital market is limited.
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9. Prepared
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Arun Dixit
 Capitalized Value:
Amount of money whose interest at highest prevailing rate of interest will
be equal to the net income or net return in perpetuity ( for specific period)
Net Rent = Gross Rent – Out going
Year Purchase (Y.P.) = 1/(R+S) where S – Coefficient of sinking fund
Capitalized value = Net Return * Year’s Purchase
In case there are immediate repairs (capital repairs) to be undertaken then
Net Value = Capitalized Value – Capital Repairs
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10. Prepared
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Arun Dixit
 Three insights concerning market outcomes ;
 Free markets allocate the supply of goods to the buyers who value them most
highly, as measured by their willingness to pay.
 Free markets allocate the demand for goods to the sellers who can produce them
at least cost.
 Free markets produce the quantity of goods that maximizes the sum of
consumer and producer surplus.
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11. Prepared
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Arun Dixit
The portfolio management process is an integrated compilation of steps implemented in a
consistent way to create and manage a suitable portfolio of assets to achieve client’s specified
goals.
Investment Policy Statement
Rules of Investment
Policy Statement
Endorse long term discipline, Easy to implement, Provides
protection against short term portfolio
Elements of the
Policy Statement
Client description, purpose, responsibilities and duties, objectives
and constraints, reviewing schedule, Instructions for adjustments.
Types of the Policy
Statement
Passive Investment, Active Investment, and Hybrid Investments
A formal written document created to govern investment decision making after taking into
account the client’s objectives and constraints.
PlanningSteps In Portfolio Management Process Execution Feedback
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12. Prepared
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Arun Dixit
Types of
Insurance
Fire
Insurance
Guarantee
Insurance
Social
Insurance
Life
Insurance
or
Personal
Insurance
Property
Insurance
Marine
Insurance
Liability
Insurance
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13. Prepared
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Property Prices
Supply of Property
New BuildsNumbers Selling
Speculative
Demand
Affordability of
Property
Interest Rate
Availability of
Mortgages
Economic Growth
Number of
Households
Demand - Side
Supply - Side
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14. Prepared
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Arun Dixit
Financial management involves taking in important decisions, which are as under;
 Investment Decision :- The Investment Decision relates to the decision made by
the investors or the top level management with respect to the amount of funds to be
deployed in the investment opportunities.
 Financial Decision :- Financial decision making involves analyzing the financial
problems that the company faces and deciding which course of action should be taken.
 Dividend Decision :- Dividend is a distribution of profits by a corporation to its
shareholders. When a corporation earns a profit or surplus, it is able to pay a
proportion of the profit as a dividend to shareholders.
 Working Capital Decision :- Working capital is the difference between resources in
cash or readily convertible into cash (current assets), and cash requirements (current
liabilities).
 Ensures Liquidity :- Liquidity management means ensuring that the institution
maintains sufficient cash and liquid assets. (“cash on hand or an asset that can be
readily converted to cash”).
 Profit Management :- Profit management is the traditional approach and primary
objective of financial management. It represent the process or the approach by which
profits EPS is increased.
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15. Prepared
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Arun Dixit
Aim of finance function is to assess the financial needs of an enterprise and then
finding out suitable sources for raising them. The sources should be commensurate
with the needs of the business. which are as under;
 Acquiring Sufficient Funds - This is to identifying the amount of finance required
by a firm & looking out for the different sources from which funds can be obtained
on timely manner.
 Proper Utilization of Funds - Funds must be used more effectively & efficiently so
that maximum benefits can be earned by the firm.
 Increasing Profitability – There are four key areas that can help drive
profitability, Reducing Cost, Increasing Turnover, Increasing Productivity,
Increasing Efficiency.
 Maximizing Firm Value –Firm value is a economic concept that reflects the value
of a business at a particular date.
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16. Prepared
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Arun Dixit
ENTERPRISES VALUE
EV= (Market Value of Equity + Market
Value of Preferred Equity + Market
Value of Debt + Minority Interest –
Cash & Cash Equivalents)
OPERATING FREE CASH FLOW
OFCF = (EBIT (1-T) + Depreciation –
Capex – Working Capital – Any Other
Assets.)
EBIT = Earning Before Interest and
Tax,
CAPEX = Capital Expenditure
T = TaxBOOK VALUE
Book value of firm is its value as
reflected in its ‘Books’ or financial
statements. It’s difference between
assets and liabilities. It is recorded as
shareholder’s equity in the balance
sheet.
MAKET VALUE
Market value of a company also know
as market capitalization, is its value as
reflected in stock exchange. It is
calculated by multiplying a co.’s
outstanding share by its current
market price.
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17. Prepared
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Arun Dixit
 Financial Planning
 Source Identification
 Raising of Fund
 Investment of Fund
 Protection of Capital
 Distribution of Profit
 Managing Fund
 Forecasting Cash Flow
 Forecasting Future profits
 Pension Fund Management
 Tax Management
 Insurance Risk Management
 Managing Assets
 Cost Control
 Pricing
 Time Schedule
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18. Prepared
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Arun Dixit
Chief Financial Officer (CFO)
Treasurer Controller
Cash
Management
Banking
Relationship
AccountingTaxes
Raising
Capital
Financial
Reporting
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19. Prepared
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Arun Dixit
Your
Financial
Landscape
Aspiration
s Goals Liabilitie
s
Inheritanc
e
Insurance
Loans
Expenses
Assets
IncomeHealth
Taxation
Risks
Retiremen
t
Wealth
Transfer
Employment
Lifestyl
e
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20. Prepared
By
Arun Dixit
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