Introduction to Business Finance, Meaning and Definition of Financial Management, Objectives of Financial Management, Approach to Financial Management, Finance and it's relation with other disciplines, Functions of Finance Manager.

1. 1. ENVIRONMENT OF
BUSINESS FINANCE
By: Prof. Mohasin A. Tamboli
PIRENS Technical Campus
Mob: 9766010560
Email: mohasinat@gmail.com
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Prof. M.A.Tamboli

2. Introduction
• Finance is the “Science of Money”
• Finance was a branch of economics till 1890.
Economics is defined as study of efficient
use of scare recourses.
• Finance is the process of conversion of
accumulated funds to productive use.
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3. Finance
• Administrative function in an organization,
which relate to arrangement of cash and
credit to carry out organizational objectives.
• In simple finance is defined as-
‘Activity concerned with the planning,
raising, controlling and administrating of
funds used in the business’
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4. Financial Management
• Financial Management is an application of
general managerial principles to the area of
finance.
• Financial management is the operational activity
of a business that is responsible for obtaining
and effectively utilizing the funds for efficient
business operations.
• Financial management is managerial activity
which concerned with the planning and
controlling of firm’s financial resources.
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5. Goals of Financial Management
1. Profit Maximization: Any commercial
organization is established for profits. Profit
is a parameter for measuring the
performance of a business organization.
Higher the risk, higher the possibility of
profits. Hence, risk has to be balanced with
the objective of profit maximization.
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6. Goals of Financial Management
2. Wealth Maximization: Shareholders are
the main stakeholders in the firm and in
fact they are the owners of the firm. The
wealth of shareholders is measured in
terms of value of share of a firm. It implies
that all the financial decisions should be
taken by keeping the shareholders interest
in mind which result in higher dividends &
increased market price of shares.
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7. Approaches to Financial Management
1. Traditional Approach:
a. Mainly concern with raising of funds for
various requirements.
b. Concern with only long term fund.
c. Concept of Working Capital was not
considered.
d. Fund raising mainly through equity,
debenture and preference shares.
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8. Approaches to Financial Management
2. Modern Approach:
a. Finance function become more analytical
and decision oriented.
b. Apart from fund raising, fund utilization
became of paramount importance.
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9. Finance and Other Related Disciplines
1. Finance and Economics
2. Finance and Accounting
3. Finance and Production
4. Finance and Marketing
5. Finance and Law
6. Finance and Taxation
7. Finance and Information Technology
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10. Finance and Economics
• Finance is a branch of economics.
• Economics deals with supply & demand, cost
& profit, production & consumption and so on.
• Financial management related to economics in
two way-
a. Micro economics b. Macro economics
Profit Maximization Institutional Structure
(Marginal Analysis) (Economic Environment Analysis)
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11. Finance and Accounting
• Accounting is an important input in financial
decision making process.
• Accounting is concern with recording
business transactions.
• The end product of accounting is financial
statement. Which helps to evaluate
performance and decision making.
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12. Finance and Production
• Any change in production process may
require additional funds.
• Thus, production process, production
capacity are closely related to finance.
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13. Finance and Marketing
• New product development, sales
promotion plans, new channels of
distribution, advertising campaign etc. will
require additional funds and have impact
on expected cash flows of the business.
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14. Finance and Law
• A sound knowledge of corporate laws,
business laws, international laws, trade and
patent laws, contract etc. are again
important in globalized business scenario
for raising fund through External
Commercial Borrowing
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15. Finance and Taxation
• A sound knowledge in taxation, both direct
and indirect , is expected of a finance
manager, as all financial decisions are
likely to have tax implications.
• Tax planning is an important function of a
finance manager.
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16. Finance and Information Technology
• Information technology is now driving all
business activities.
• Finance manager need to know how to
integrate finance and costing through
software packages including ERP.
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17. Functions of Finance Manager/Key
Strategies
1. Raising fund (Financing Decision)
2. How funds are utilized
3. Investment decisions
4. Dividend decisions
5. Efficient working capital management
6. Tax administration and Tax Planning
7. Cost Control
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18. QUESTIONS ?
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