WORKING CAPITAL
According to the definition of Weston and Brigham, “Working Capital refers to a firm’s investment in short-term assets, cash, shortterm securities, accounts receivables and inventories”. Working Capital may be categorised: - Gross Working Capital - Net Working Capital
Financial Management is a vital activity in any organization. It is the process of planning, organizing, controlling and monitoring financial resources with a view to achieve organizational goals and objectives.
WORKING CAPITAL
According to the definition of Weston and Brigham, “Working Capital refers to a firm’s investment in short-term assets, cash, shortterm securities, accounts receivables and inventories”. Working Capital may be categorised: - Gross Working Capital - Net Working Capital
Financial Management is a vital activity in any organization. It is the process of planning, organizing, controlling and monitoring financial resources with a view to achieve organizational goals and objectives.
Meaning of Financial Management
• Managerial activities which deals with planning and controlling of firms and financial sources. • Financial management is an area of financial decision making, harmonising individual motives and enterprise goals.
Meaning of Financial Management
• Managerial activities which deals with planning and controlling of firms and financial sources. • Financial management is an area of financial decision making, harmonising individual motives and enterprise goals.
Meaning of Financial Management
• Managerial activities which deals with planning and controlling of firms and financial sources. • Financial management is an area of financial decision making, harmonising individual motives and enterprise goals.
Meaning of Financial Management
• Managerial activities which deals with planning and controlling of firms and financial sources. • Financial management is an area of financial decision making, harmonising individual motives and enterprise goals.
Capital Investment
• Capital investment refers to funds invested in a firm or enterprise for the purpose of furthering its business objectives. Capital investment may also refer to a firm's acquisition of capital assets or fixed assets such as manufacturing plants and machinery that is expected to be productive over many years. Sources of capital investment are manifold and can include equity investors, banks, financial institutions, venture capital and angel investors.
Scope of business economics, no uniformity of views exists among various authors. However, the following aspects are said to generally fall under business economics.
1. Demand Analysis and Forecasting
2. Cost and production Analysis.
3. Pricing Decisions, policies and practices.
4. Profit Management.
5. Capital Management.
What is Business
• A business is usually defined as a commercial enterprise • Some are run by only one person who carry out all of the required functions • Others employ thousands of people and provide goods and services to people all over the world • Each business can be defined or described by its type of ownership, the goods produced or services offered, the types of jobs provided, or the functions it performs in a community.
Business Economics
• According to Mc Nair and Meriam, Business economic consists of the use of economic modes of thought to analyse business situations. • Siegel man has defined business economic (or business economic) as the integration of economic theory with business practice for the purpose of facilitating decision-making and forward planning by management
Business is influenced not only by what decisions are taken within the firm but also by the general business environment. General decisions are based on two factors : • External Factors : This includes all those factors which are outside the control of business. The firm can only make timely adjustment to these external factors. • Internal Factors : This includes all those factors which are within the control.
International Business Meaning
• International business consists of trades and transactions at a global level. These include the trade of goods, services, technology, capital and/or knowledge."International business" is also defined as the study of the internationalization process of multinational enterprises.
International Business Meaning
• International business consists of trades and transactions at a global level. These include the trade of goods, services, technology, capital and/or knowledge."International business" is also defined as the study of the internationalization process of multinational enterprises.
Business Economics
• According to Mc Nair and Meriam, Business economic consists of the use of economic modes of thought to analyse business situations. • Siegel man has defined business economic (or business economic) as the integration of economic theory with business practice for the purpose of facilitating decision-making and forward planning by management.
Business Economics
• According to Mc Nair and Meriam, Business economic consists of the use of economic modes of thought to analyse business situations. • Siegel man has defined business economic (or business economic) as the integration of economic theory with business practice for the purpose of facilitating decision-making and forward planning by management.
Auditing
Spicer and Pegler: "Auditing is such an examination of books of accounts and vouchers of business, as will enable the auditors to satisfy himself that the balance sheet is properly drawn up, so as to give a true and fair view of the state of affairs of the business and that the profit and loss account gives true and fair view of the profit/loss for the financial period, according to the best of information and explanation given to him and as shown by the books; and if not, in what respect he is not satisfied."
THE NEED FOR ACCOUNTING Accounting information can be used to assess past financial performance of a company and help predict its future performance.All kinds of organizations— government agencies, nonprofit organizations, and others —rely on accounting to gauge their progress.
The Need for Accounting
Accounting information can be used to assess past financial performance of a company and help predict its future performance.All kinds of organizations—
government agencies, nonprofit organizations, and others —rely on accounting to gauge their progress.
The accounting process begins with a transaction.A transaction is any event that affects the financial position of an organization and requires recording. Many concepts, conventions, and rules determine what events a company records as accounting transactions and how accountants measure the financial impact of each transaction.Financial statements are used to summarize the recorded accounting transactions.
The Need for Accounting
Accounting information can be used to assess past financial performance of a
company and help predict its future performance.All kinds of organizations—
government agencies, nonprofit organizations, and others —rely on accounting to gauge their progress.
The accounting process begins with a transaction.A transaction is any event that affects the financial position of an organization and requires recording. Many concepts, conventions, and rules determine what events a company records as accounting transactions and how accountants measure the financial impact of each transaction.Financial statements are used to summarize the recorded accounting transactions
To understand the concept of Taxation, heads of income, including foreign income assessment procedures, adjudication and settlement of tax disputes are the focus points of study
in this paper.
Socio-Legal Dimensions of Gender (LLB-507 & 509 )cpjcollege
This paper intends to sensitize the students about the changing
dimensions of gender and also familiarizes them with the subtle manifestations of inequality rooted in our society.
The objective of the paper is to apprise the students with the laws relating to marriage, dissolution, matrimonial remedies, adoption, contemporary trends in family institutions in India, in particular the Hindus and Muslims.
Alternative Dispute Resolution (ADR) [LLB -309] cpjcollege
Alternative Dispute Resolution has become the primary means by which cases are resolved now days, especially commercial, business disputes. It has emerged as the preferred method for resolving civil cases, with litigation as a last resort. Alternative Dispute Resolution provides an overview of the statutory, procedural, and case law underlining these processes and their interplay with litigation. A significant theme is the evolving role of
professional ethics for attorneys operating in non-adversarial settings. Clients and courts increasingly express a preference for attorneys who are skilled not only in litigation but in problem-solving, which costs the clients less in terms of time, money and relationship. The law of ADR also provides an introduction to negotiation and mediation theory.
Environmental Studies and Environmental Laws (: LLB -301)cpjcollege
The objective of this paper is to acquaint the students with the environmental issues and the measures taken for its protection along with the norms prevailing at international and national
level
The paper will focus on the civil procedures followed in instituting a suit. The students will be familiarised with certain important concepts and practical skill development activity will provide insights into the actual working of the court procedures.
The objective of this paper is to provide an understanding of basic concepts of Indian Constitution and various organs created by the Constitution and their functions.
The paper needs to be taught in light of the New Companies Amendment Act 2013. The Companies act 1956 has not been repealed. The New Act of 2013 is made applicable by notifications as to particular sections by the Ministry of Company Affairs. The
notified sections which replace the provisions of Companies Act 1956 will be highlighted
It is an indispensable complementary part of our legal system without the study of which no advocate is suitably equipped with the basic requisites required to go to the court.
This paper focuses on understanding the forms that governments acquire along with nature and conflicts encountered by different forms of governments. Students would get trained to look into center-state conflicts and legislature-executive –judiciary conflicts.
The design is to look into how emerging issues in international relations become important in the legal context and prepare the students to understand International Law.
This paper focuses on various aspects of health care law including the constitutional perspective, obligations, and negligence of medical professionals and remedies available to
consumers of health care.
The object of this paper is to focus on land reforms in India, Constitutional provisions related to land reforms, Land Acquisition, Rehabilitation, and Resettlement Act,2013, Urban Real Estate Development Laws and the Provisions of the Rent Laws under the
Delhi Rent Control Act, 1958.
Business Environment and Ethical Practices (BBA LLB 213 )cpjcollege
The objective of the course is to familiarize students with the different aspects of business environment and ethical practices to be adopted by organizations in conducting their business.
The objective of the course is to familiarize students with the different aspects of managing Human Resources in the organization through the phases of acquisition, development and retention
June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...Levi Shapiro
Letter from the Congress of the United States regarding Anti-Semitism sent June 3rd to MIT President Sally Kornbluth, MIT Corp Chair, Mark Gorenberg
Dear Dr. Kornbluth and Mr. Gorenberg,
The US House of Representatives is deeply concerned by ongoing and pervasive acts of antisemitic
harassment and intimidation at the Massachusetts Institute of Technology (MIT). Failing to act decisively to ensure a safe learning environment for all students would be a grave dereliction of your responsibilities as President of MIT and Chair of the MIT Corporation.
This Congress will not stand idly by and allow an environment hostile to Jewish students to persist. The House believes that your institution is in violation of Title VI of the Civil Rights Act, and the inability or
unwillingness to rectify this violation through action requires accountability.
Postsecondary education is a unique opportunity for students to learn and have their ideas and beliefs challenged. However, universities receiving hundreds of millions of federal funds annually have denied
students that opportunity and have been hijacked to become venues for the promotion of terrorism, antisemitic harassment and intimidation, unlawful encampments, and in some cases, assaults and riots.
The House of Representatives will not countenance the use of federal funds to indoctrinate students into hateful, antisemitic, anti-American supporters of terrorism. Investigations into campus antisemitism by the Committee on Education and the Workforce and the Committee on Ways and Means have been expanded into a Congress-wide probe across all relevant jurisdictions to address this national crisis. The undersigned Committees will conduct oversight into the use of federal funds at MIT and its learning environment under authorities granted to each Committee.
• The Committee on Education and the Workforce has been investigating your institution since December 7, 2023. The Committee has broad jurisdiction over postsecondary education, including its compliance with Title VI of the Civil Rights Act, campus safety concerns over disruptions to the learning environment, and the awarding of federal student aid under the Higher Education Act.
• The Committee on Oversight and Accountability is investigating the sources of funding and other support flowing to groups espousing pro-Hamas propaganda and engaged in antisemitic harassment and intimidation of students. The Committee on Oversight and Accountability is the principal oversight committee of the US House of Representatives and has broad authority to investigate “any matter” at “any time” under House Rule X.
• The Committee on Ways and Means has been investigating several universities since November 15, 2023, when the Committee held a hearing entitled From Ivory Towers to Dark Corners: Investigating the Nexus Between Antisemitism, Tax-Exempt Universities, and Terror Financing. The Committee followed the hearing with letters to those institutions on January 10, 202
Francesca Gottschalk - How can education support child empowerment.pptxEduSkills OECD
Francesca Gottschalk from the OECD’s Centre for Educational Research and Innovation presents at the Ask an Expert Webinar: How can education support child empowerment?
The Roman Empire A Historical Colossus.pdfkaushalkr1407
The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
Introduction to AI for Nonprofits with Tapp NetworkTechSoup
Dive into the world of AI! Experts Jon Hill and Tareq Monaur will guide you through AI's role in enhancing nonprofit websites and basic marketing strategies, making it easy to understand and apply.
Instructions for Submissions thorugh G- Classroom.pptxJheel Barad
This presentation provides a briefing on how to upload submissions and documents in Google Classroom. It was prepared as part of an orientation for new Sainik School in-service teacher trainees. As a training officer, my goal is to ensure that you are comfortable and proficient with this essential tool for managing assignments and fostering student engagement.
Synthetic Fiber Construction in lab .pptxPavel ( NSTU)
Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
How to Make a Field invisible in Odoo 17Celine George
It is possible to hide or invisible some fields in odoo. Commonly using “invisible” attribute in the field definition to invisible the fields. This slide will show how to make a field invisible in odoo 17.
Honest Reviews of Tim Han LMA Course Program.pptxtimhan337
Personal development courses are widely available today, with each one promising life-changing outcomes. Tim Han’s Life Mastery Achievers (LMA) Course has drawn a lot of interest. In addition to offering my frank assessment of Success Insider’s LMA Course, this piece examines the course’s effects via a variety of Tim Han LMA course reviews and Success Insider comments.
1. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Semester: BBA Fourth Semester
Name of the Subject:
FINANCIAL MANAGEMENT
Unit - 1
2. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
• Have a good understanding of the:
– basic types of financial management decisions
and the role of the financial manager
– goal of financial management
– financial implications of the different forms of
business organization
– conflicts of interest that can arise between
managers and owners
Unit – 1
Key concepts and skills
3. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Chapter outline
• Finance: A quick look
• Business finance and the financial manager
• Forms of business organisation
• The goal of financial management
• The agency problem and control of the
corporation
• Financial markets and the corporation
4. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
The four basic areas of finance
1. Corporate finance or business finance
2. Investments
3. Financial institutions
4. International finance
5. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Investments
• Working with financial assets such as
shares and bonds
• Value of financial assets, risk versus return
and asset allocation
• Job opportunities
– Stockbroker
– Financial advisor
– Portfolio manager
– Security analyst
6. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Objectives of Financial Management
• Profit Maximisation
• Wealth Maximisation
7. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Maximizing Shareholder Wealth
• The objective of financial management is to
maximize shareholder wealth as reflected in
share prices.
8. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Role of Management
• Management serves as an arbitrator and moderator
between conflicting interest groups or stakeholders
and objectives.
• Creditors, managers, employees and customers hold
contractual claims against the firms revenues
• Shareholders have residual claims against the
company
9. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Sources of Finance
• Sources of finance are equity, debt, debentures,
retained earnings, term loans, working capital loans,
letter of credit, euro issue, venture funding etc.
These sources of funds are used in different
situations. They are classified based on time period,
ownership and control, and their source of
generation. It is ideal to evaluate each source of
capital before opting it.
10. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Long-Term Sources of Finance
• Share Capital or Equity Shares
• Preference Capital or Preference Shares
• Retained Earnings or Internal Accruals
• Debenture / Bonds
• Term Loans from Financial Institutes, Government,
and Commercial Banks
• Venture Funding
• Asset Securitization
11. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Medium Term Sources of Finance
• Preference Capital or Preference Shares
• Debenture / Bonds
• Medium Term Loans from
– Financial Institutes
– Government, and
– Commercial Banks
12. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Short Term Sources of Finance
• Short Term Loans like Working Capital Loans from
Commercial Banks
• Fixed Deposits for a period of 1 year or less
• Advances received from customers
• Creditors
• Payables
• Factoring Services
• Bill Discounting etc
13. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Factoring
• Factoring, receivables factoring or debtor financing, is when a
company buys a debt or invoice from another company.
Factoring is also seen as a form of invoice discounting in many
markets and is very similar but just within a different context.
In this purchase, accounts receivable are discounted in order
to allow the buyer to make a profit upon the settlement of the
debt. Essentially factoring transfers the ownership of accounts
to another party that then chases up the debt.
14. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Venture Capital
• Venture capital is financing that investors provide
to startup companies and small businesses that are
believed to have long-term growth potential. Venture
capital generally comes from well-off investors,
investment banks and any other financial
institutions. However, it does not always take just a
monetary form; it can be provided in the form of
technical or managerial expertise.
15. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Commercial Bank
• A commercial bank is a type of financial institution
that accepts deposits, offers checking account
services, makes business, personal and mortgage
loans, and offers basic financial products
like certificates of deposit (CDs) and savings accounts
to individuals and small businesses. A commercial
bank is where most people do their banking, as
opposed to an investment bank.
16. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Certificate of Deposit
• The certificate of deposit indicates that the investor has
deposited a sum of money for specified period of time and at
a specified rate of interest. CD rates, terms and dollar
amounts will vary from institution to institution. CDs are not
publicly traded securities. As such, you will not find them
traded on any exchange. You can also purchase CDs through
a stockbroker. Because brokers have access to CDs from many
institutions across the country, investors have more choices in
regard to terms and yield.
17. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Global Depositary Receipt
• A global depositary receipt (GDR) is a bank certificate
issued in more than one country for shares in a
foreign company. The shares are held by a foreign
branch of an international bank. The shares trade as
domestic shares but are offered for sale globally
through the various bank branches. A GDR is
a financial instrument used by private markets to
raise capital denominated in either U.S. dollars or
Euros
18. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Time Value of Money
• The time value of money (TVM) is the concept that
money available at the present time is worth more
than the identical sum in the future due to its
potential earning capacity. This core principle
of finance holds that, provided money can earn
interest, any amount of money is worth more the
sooner it is received. TVM is also sometimes referred
to as present discounted value.
19. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Valuation of Financial Securities,
Instruments & Derivatives
• Security valuation is important to decide on the
portfolio of an investor. All investment decisions are
to be made on a scientific analysis of the right price
of a share. Hence, an understanding of the valuation
of securities is essential. Investors should buy
underpriced shares and sell overpriced shares. Share
pricing is thus an important aspect of trading.
Conceptually, four types of valuation models are
discernible.
20. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Summary
1. With the increasing complexity and uncertainty in
the marketplace, finance is emerging as the
business function that holds the corporation
together at the top management level.
2. If markets are "perfect", (perfect competition,
perfect information, rational market participants,
no externalities), economic theory has
demonstrated that an efficient allocation of
resources will result.
21. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Semester : BBA Fifth Semester
Name of the Subject:
FINANCIAL MANAGEMENT
Unit-2
22. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Unit – 2
Time Value of Money
• Time value of money - Money has the ability
to increase over time (if it is invested)
• Interest - The amount of money that is earned
over a certain time period
• Interest rate - The rate interest is earned
23. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Bond Valuation
• Bonds are debt instruments used by business and
government to raise large sums of money
• Most bonds share certain basic characteristics
– First, a bond promises to pay investors a fixed amount of
interest, called the bond’s coupon.
– Second, bonds typically have a limited life, or maturity.
– Third, a bond’s coupon rate equals the bond’s annual
coupon payment divided by its par value.
– Fourth, a bond’s coupon yield equals the coupon payment
divided by the bond’s current market price
24. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Capital Structure
• The value of a firm is defined to be the sum of the
value of the firm’s debt and the firm’s equity.
V = B + S
25. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Basic Definitions
• V = value of firm
• FCF = free cash flow
• WACC = weighted average cost of capital
• rs and rd are costs of stock and debt
• re and wd are percentages of the firm that are
financed with stock and debt.
26. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Capital Structure Theory
• MM theory
– Zero taxes
– Corporate taxes
– Corporate and personal taxes
• Trade-off theory
• Signaling theory
• Debt financing as a managerial constraint
27. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Optimal capital structure
• An optimal capital structure is the best debt-
to-equity ratio for a firm that maximizes its
value. The optimal capital structure for a
company is one that offers a balance between
the ideal debt-to-equity range and minimizes
the firm's cost of capital.
28. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Cost of capital
• Cost of capital refers to the opportunity cost of
making a specific investment. It is the rate of return
that could have been earned by putting the same
money into a different investment with equal risk.
Thus, the cost of capital is the rate of return required
to persuade the investor to make a given investment.
29. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Importance cost of capital
• Designing the capital structure
• Capital budgeting decisions
• Comparative study of sources of financing
• Evaluations of financial performance
• Knowledge of firms expected income and inherent
risks
• Financing and Dividend Decision
30. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Classification of Cost of Capital
• Explicit Cost and Implicit Cost
• Future Cost and Historical Cost
• Specific Cost
• Average Cost and Marginal Cost
31. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Leverage
• Leverage refers to the employment of assets
or sources of fund bearing fixed payment to
magnify EBIT or EPS respectively. So it may be
associated with investment activities or
financing activities.
32. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Types of leverages
• Operating leverage
• Financial leverage
33. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Importance of Leverage
• Measurement Of Operating Risk
• Measurement Of Financial Risk
• Managing Risk
• Designing Appropriate Capital Structure Mix
• Increase Profitability
34. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Semester: SEVENTH Semester
Name of the Subject:
WOMEN AND LAW
RAPE LAWS IN INDIA
Semester: BBA Fifth Semester
Name of the Subject:
FINANCIAL MANAGEMENT
Unit-3
35. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Capital Budgeting
Capital budgeting is the process in which a business
determines and evaluates potential expenses or
investments that are large in nature. These
expenditures and investments include projects such
as building a new plant or investing in a long-term
venture. Often times, a prospective project's lifetime
cash inflows and outflows are assessed in order to
determine whether the potential returns generated
meet a sufficient target.
36. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Importance Of Capital Budgeting
• Develop and formulate long-term strategic
goals
• Seek out new investment projects
• Estimate and forecast future cash flows
• Facilitate the transfer of information
• Monitoring and Control of Expenditures
37. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Capital Budgeting Techniques
• Payback Period measures the time in which the initial cash
flow is returned by the project. Cash flows are not discounted.
Lower payback period is preferred.
• Net Present Value (NPV) is equal to initial cash outflow less
sum of discounted cash inflows. Higher NPV is preferred and
an investment is only viable if its NPV is positive.
• Accounting Rate of Return (ARR) is the profitability of the
project calculated as projected total net income divided by
initial or average investment. Net income is not discounted.
38. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
• Internal Rate of Return (IRR) is the discount rate at which net
present value of the project becomes zero. Higher IRR should
be preferred.
• Profitability Index (PI) is the ratio of present value of future
cash flows of a project to initial investment required for the
project.
Capital Budgeting Techniques
39. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Capital Rationing
• Capital rationing is the act of placing restrictions on
the amount of new investments or projects
undertaken by a company. This is accomplished by
imposing a higher cost of capital for investment
consideration or by setting a ceiling on specific
portions of a budget.
40. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Sensitivity Analysis
• Sensitivity Analysis is a tool used in financial
modeling to analyze how the different values of a set
of independent variables affect a specific dependent
variable under certain specific conditions.
41. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Standard Deviation
• The standard deviation is a statistic that measures
the dispersion of a dataset relative to its mean and is
calculated as the square root of the variance. It is
calculated as the square root of variance by
determining the variation between each data point
relative to the mean. If the data points are further
from the mean, there is higher deviation within the
data set; thus, the more spread out the data, the
higher the standard deviation.
42. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Decision Tree
• A decision tree is a graphical representation of
possible solutions to a decision based on
certain conditions. It's called a decision tree
because it starts with a single box (or root),
which then branches off into a number of
solutions, just like a tree.
43. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Risk-Adjusted Discount Rate
• An estimation of the present value of cash for high risk
investments is known as risk-adjusted discount rate. A very
common example of risky investment is the real estate. Risk
adjusted discount rate is representing required periodical
returns by investors for pulling funds to the specific property.
It is generally calculated as a sum of risk free rate and risk
premium. The variation of risk premium is depending on the
risk aversion of investor and the perception of investor about
the size of property’s investment risk.
Risk-adjusted discount rate = Risk free rate + Risk premium
44. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Semester: SEVENTH Semester
Name of the Subject:
WOMEN AND LAW
RAPE LAWS IN INDIA
Semester: BBA Fifth Semester
Name of the Subject:
FINANCIAL MANAGEMENT
Unit-4
45. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Working Capital Management
• Working capital management refers to a company's
managerial accounting strategy designed to monitor
and utilize the two components of working capital,
current assets and current liabilities, to ensure the
most financially efficient operation of the company.
The primary purpose of working capital management
is to make sure the company always maintains
sufficient cash flow to meet its short-term operating
costs and short-term debt obligations.
46. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Cash management
• Cash management is the corporate process of
collecting and managing cash, as well as using
it for (short-term) investing. It is a key
component of ensuring a company's financial
stability and solvency.
47. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Inventory management
• Inventory management is the supervision of
non-capitalized assets (inventory) and stock
items. A component of supply
chain management, inventory
management supervises the flow of goods
from manufacturers to warehouses and from
these facilities to point of sale.
48. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Accounts receivable management
• Accounts receivable management
incorporates is all about ensuring that
customers pay their invoices. Good
receivables management helps prevent
overdue payment or non-payment. It is
therefore a quick and effective way to
strengthen the company's financial or liquidity
position.
49. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Account Payables Management
• Account Payables Management refers to the
set of policies, procedures, and practices
employed by a company with respect
to managing its trade credit purchases.
50. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Dividend policy
• Dividend policy is the set of guidelines a
company uses to decide how much of its
earnings it will pay out to shareholders. Some
evidence suggests that investors are not
concerned with a company'sdividend
policy since they can sell a portion of their
portfolio of equities if they want cash
51. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Irrelevance Theory of Dividend
• The dividend irrelevance theory is the theory
that investors do not need to concern
themselves with a company's dividend policy
since they have the option to sell a portion of
their portfolio of equities if they want cash.
52. Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Relevance concept of Dividend
• They would discount future dividends. The
retained earnings are evaluated by the
investors as a risky promise. In case the
earnings are retained, the market price of the
shares would be adversely affected. In case
the earnings are retained, the market price of
the shares would be adversely affected.