Finance meaning financial management meaning Evolution Scope Functions

1. Evolution, Scope and
Functions of finance
managers

2. • Finance.
• Financial Management.
• Evolution.
• Scope
• Functions.

3. •Finance is provision of money at time when it is required.
•Finance is a management of money and other valuables
which can be easily converted into cash.
•Finance is the art and science of managing money.

4. Finance
Public finance
State government
Central government
Government institutions
Private finance
Personal finance
Business finance
Finance of non-profit
organizations

5. •Public Finance: Public finance means government finance
under which the principles and practices relating to the
procurement and management of funds for the central
government, State government and local bodies are covered.
• Private Finance: Private finance means procurement and
management of funds by individuals and private institutions.

6. • Financial management is an applied branch of management
that looks after the finance function of a business.
• “Financial management is the operational activity of the
business that is responsible for obtaining and effectively
utilizing the funds necessary for efficient operations”.

7. Financial management emerged as a distinct field of study
at the turn of 20th century. Its evolution can be divided into
three broad phases:
Transitional
Modern
Traditional

8. Traditional phase lasted for about four decades. Following
were its important features:
• The focus of financial management was mainly on certain
episodic events like formation, issuance of capital, major
expansion, merger, reorganization and liquidation in the
lifecycle of the firm.
• The approach placed great emphasis on long term problems.

9. •The Transitional Phase began around the early 1940s and
continued through the early 1950s.
•Nature of financial management during was similar to that of
the traditional phase.
•Greater emphasis wad placed on the day-to-day problems
faced by financial managers in the areas of funds analysis,
planning and control.

10. The modern phase begin in mid 50s.The distinctive features
of modern phase are:
• The central concern is considered to be a rational matching
of funds to their uses so as to maximize the wealth of the
shareholders.
• The approach is more logical.

11. There are mainly two approaches of financial management:
Traditional Approach.
Modern Approach.

12. Evolved during the 1920’s and 1930’s known as
‘Corporation Finance’.The field of study dealing with finance as
encompassing three related aspects of raising and administering
resources from outside.
• Institutional sources of finance.
• Issue of financial instruments to collect necessary funds from
the through which funds are raised from the capital market.
• The legal and accounting relationship between the business
and source of finance.

13. • The modern approach views financial management in a
broad sense and provides a analytical and conceptual
framework for financial decision making.
• In this approach, financial management is concerned with
acquisition of funds and their effective and optimum
utilisation.

14. Functions of Finance under modern approach.
Financial Management in the modern sense of the firm
can be broken down into three major decisions as functions of
finance. These are :
• The investment decision.
• The financing decision.
• The dividend decision.

15. Functions of
financial
management
Acquisition of
funds
Allocation of
funds
Distribution of
funds
Financing
Decisions
Investment
Decisions
Dividend
Decisions

16. • Collect funds from different sources for the fulfillment of
business needs.
• This decision is a part of capital structure.
• Capital structure determines the ratio of debt and equity
capital in the total funds.
• Capital structure which utilizes debt securities adequately
is called optimum capital structure.

17. The investment decision relates to the selection of assets in
which funds will be invested by a firm. The assets which can
be acquired fall into two broad categories:
• Long term assets or fixed assets which are used for earning
over a period.
•Short term or current assets which can be converted into cash
usually within one year.

18. It refers to selection of an asset or investment proposal or
course of action whose benefits are likely to be available in
future over the lifetime of the project. The main elements of
capital budgeting are:
• Choice of the new assets out of the alternatives available.
• Capital budgeting decision is the analysis of risk and
uncertainty.

19. •WCM is concerned with the management of current assets.
•For efficient management of working capital financial
manager must maintain adequate balance in liquidity and
profitability(inventory, receivables and cash are required to be
managed properly).

20. Income of the firm can be used in two ways:
•To distribute it as dividend to the shareholders,
•To retain it in the business in the form of accumulated profits.
The decision is based on preferences of shareholders and
investment avenues available to the firm.