This document discusses the role of financial management. It defines financial management as concerning the acquisition, financing, and management of assets to achieve an overall goal. It states the three main decisions of financial management are investment decisions, financing decisions, and asset management decisions. It argues the goal of the firm should be to maximize shareholder wealth by increasing share price over time. It also discusses agency theory and how management acts as agents for shareholders. Finally, it provides an overview of how the financial management function is typically organized within a company.
Define finance and the managerial finance function. Describe the goal of the firm, and explain why maximizing the value
of the firm is an appropriate goal for a business. Describe the nature of the principal–agent relationship
between the owners and managers of a corporation, and
explain how various corporate governance mechanisms attempt
to manage agency problems.
LG1 Define finance and the managerial finance function.
LG2 Describe the legal forms of business organization.
LG3 Describe the goal of the firm, and explain why maximizing the value of the firm is an appropriate goal for a business.
Define finance and the managerial finance function. Describe the goal of the firm, and explain why maximizing the value
of the firm is an appropriate goal for a business. Describe the nature of the principal–agent relationship
between the owners and managers of a corporation, and
explain how various corporate governance mechanisms attempt
to manage agency problems.
LG1 Define finance and the managerial finance function.
LG2 Describe the legal forms of business organization.
LG3 Describe the goal of the firm, and explain why maximizing the value of the firm is an appropriate goal for a business.
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In 2020, the Ministry of Home Affairs established a committee led by Prof. (Dr.) Ranbir Singh, former Vice Chancellor of National Law University (NLU), Delhi. This committee was tasked with reviewing the three codes of criminal law. The primary objective of the committee was to propose comprehensive reforms to the country’s criminal laws in a manner that is both principled and effective.
The committee’s focus was on ensuring the safety and security of individuals, communities, and the nation as a whole. Throughout its deliberations, the committee aimed to uphold constitutional values such as justice, dignity, and the intrinsic value of each individual. Their goal was to recommend amendments to the criminal laws that align with these values and priorities.
Subsequently, in February, the committee successfully submitted its recommendations regarding amendments to the criminal law. These recommendations are intended to serve as a foundation for enhancing the current legal framework, promoting safety and security, and upholding the constitutional principles of justice, dignity, and the inherent worth of every individual.
ALL EYES ON RAFAH BUT WHY Explain more.pdf46adnanshahzad
All eyes on Rafah: But why?. The Rafah border crossing, a crucial point between Egypt and the Gaza Strip, often finds itself at the center of global attention. As we explore the significance of Rafah, we’ll uncover why all eyes are on Rafah and the complexities surrounding this pivotal region.
INTRODUCTION
What makes Rafah so significant that it captures global attention? The phrase ‘All eyes are on Rafah’ resonates not just with those in the region but with people worldwide who recognize its strategic, humanitarian, and political importance. In this guide, we will delve into the factors that make Rafah a focal point for international interest, examining its historical context, humanitarian challenges, and political dimensions.
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NATURE, ORIGIN AND DEVELOPMENT OF INTERNATIONAL LAW.pptxanvithaav
These slides helps the student of international law to understand what is the nature of international law? and how international law was originated and developed?.
The slides was well structured along with the highlighted points for better understanding .
4. 1-4
Investment Decisions
What is the optimal firm size?
What specific assets should be
acquired?
What assets (if any) should be
reduced or eliminated?
Most important of the three
decisions.
5. 1-5
Financing Decisions
What is the best type of financing?
What is the best financing mix?
What is the best dividend policy?
How will the funds be physically
acquired?
Determine how the assets (LHS of
balance sheet) will be financed (RHS
of balance sheet).
6. 1-6
Asset Management
Decisions
How do we manage existing assets
efficiently?
Financial Manager has varying degrees
of operating responsibility over assets.
Greater emphasis on current asset
management than fixed asset
management.
7. 1-7
What is the Goal
of the Firm?
Maximization of
Shareholder Wealth!
Value creation occurs when
we maximize the share price
for current shareholders.
8. 1-8
Shortcomings of
Alternative Perspectives
Could increase current profits while
harming firm (e.g., defer maintenance,
issue common stock to buy T-bills, etc.).
Ignores changes in the risk level of the
firm.
Profit Maximization
Maximizing a firm’s earnings after taxes.
Problems
9. 1-9
Shortcomings of
Alternative Perspectives
Does not specify timing or duration of
expected returns.
Ignores changes in the risk level of the firm.
Calls for a zero payout dividend policy.
Earnings per Share Maximization
Maximizing earnings after taxes divided
by shares outstanding.
Problems
10. 1-10
Strengths of Shareholder
Wealth Maximization
Takes account of: current and future
profits and EPS; the timing,
duration, and risk of profits and EPS;
dividend policy; and all other
relevant factors.
Thus, share price serves as a
barometer for business performance.
12. 1-12
Role of Management
An agent is an individual
authorized by another person,
called the principal, to act in
the latter’s behalf.
Management acts as an agent
for the owners (shareholders)
of the firm.
13. 1-13
Agency Theory
Agency Theory is a branch of
economics relating to the
behavior of principals and their
agents.
Jensen and Meckling developed
a theory of the firm based on
agency theory.
14. 1-14
Agency Theory
Asymmetrical Information b/w
Principal and agent.
Management and Shareholder
Conflict: Principal b/w Agent
Agency Costs: The Deviation
from the principal’s interest by
the agent is called Agency costs.
15. 1-15
Agency Theory
Incentives include stock options,
perquisites, and bonuses.
Principals must provide incentives
so that management acts in the
principals’ best interests and then
monitor results.
16. 1-16
Corporate Governance
Corporate Governance: represents
the system by which corporations
are managed and controlled.
Includes Shareholder, boards of
directors, and senior management.
Then shareholder wealth
maximization remains the
appropriate goal in governing the
firm.
17. 1-17
Corporate Governance
C.G Control Corporate People
(Management).
Duties Towards
Stakeholders includes Public,
Employees, Debenture holders and
Government.
18. 1-18
Social Responsibility
Wealth maximization does not exclude
the firm from being socially
responsible.
Assume we view the firm as producing
both private and social goods.
Then shareholder wealth maximization
remains the appropriate goal in
governing the firm.
19. 1-19
Group Activity
Each group searched for one
practical example of corporate
social responsibility from listed
companies on the Karachi Stock
Exchange.
The activity duration is 10
minutes.
20. 1-20
Organization of the Financial
Management Function
Board of Directors
President
(Chief Executive Officer)
Vice President
Operations
Vice President
Marketing
VP of
Finance
21. 1-21
Treasurer
Capital Budgeting
Cash Management
Credit Management
Dividend Disbursement
Fin Analysis/Planning
Pension Management
Insurance/Risk Mngmt
Tax Analysis/Planning
Organization of the Financial
Management Function
VP of Finance
Controller
Cost Accounting
Cost Management
Data Processing
General Ledger
Government Reporting
Internal Control
Preparing Fin Stmts
Preparing Budgets
Preparing Forecasts
