This document discusses key concepts in financial management. It defines financial management as the acquisition, financing, and management of assets to achieve organizational goals. The main objectives of financial management are profit maximization and wealth maximization. Wealth maximization considers the time value of money and shareholders' wealth, while profit maximization can encourage cutthroat competition and corrupt practices by ignoring the time value of money. Financial functions involve raising funds and allocating them effectively.

1. PREPARED BY :
GROUP 5

2. Finance
Every organization big, medium or small
needs finance to undertake its business
operations and to attain objectives.

3. “Financial Management is concerned with
the acquisition, financing and management of
assets with some overall goal in mind.”
“Business finance can be broadly classified
as the activity concerned with planning,
raising, controlling and administering of
funds and in the business.”

4. Financial Management is concerned with the
activities of procuring funds and effective
use of these funds.
The main objectives of Financial Management
are:
• Profit Maximization
• Wealth Maximization

5. As the business organizations uses the
resources of a country like land, labor, capital
and other resources, it has an obligation to
utilize these resources effectively to earn
maximum profit.

6. Profit is the main aim of all business activity
The profit is the barometer
maximum returns to its shareholders all
investors.
timely payment of interest and principal
amount to the creditors of the company.

7. The term ‘profit’ is vague.
Time value of money is completely ignored
Encourages a number of corrupt practice
Profit maximization attracts cut throat
competition

8. Wealth maximization is a process of
maximizing wealth of the organization and
in turn maximizes the shareholders wealth.
This means by maximizing shareholders
wealth the firm is continuously working
towards the maximization of shareholders
utility.

9. Number of shares owned Current stock price per share
• If the share market price per share is
higher for a certain number of shares, then
the shareholders wealth will be greater
•The market price of shares acts as
performance index of a company.

10. The present value of cash flow is
considered
Considers time value of money
Universally accepted concept
Helps in proper management
Risk factor in the calculation

11. The Agency Relationship arises when an
owner hires a person and gives him the
decision making authority in some
organization.
This leads to conflict of interest between
the owners and the management known as
Agency Problem

12. Financial functions involve rising of funds and
the allocation of these funds in an effective
manner
The role of financial management can be
defined from the duties and
responsibilities of a financial manager.

13. 1. Raising of Funds
2. Allocation of Funds
3. Profit Planning
4. Capital Market decisions