The document discusses the key concepts of finance and financial management. It defines finance as the art and science of managing money. Financial management refers to effectively utilizing funds invested in a business and includes tasks like estimating financial needs, selecting sources of funds, and capital budgeting. The two main objectives of financial management are profit maximization, which aims to maximize profits, and wealth maximization, which focuses on maximizing shareholder value over the long-run. The agency problem refers to conflicts of interest that can arise between managers and shareholders, and it can be resolved through measures like monitoring expenditures and compensation structures.

1. Finance Function
Finance is provision of money when it is
required .
Finance may be defined as the art and science of
managing money
The Finance Function is a part
of financial management.
The finance function is the process of acquiring
and utilizing funds of a business.

2. Corporate Finance/ Financial
Management
Corporate finance can defined as the process of
raising , providing and administering of all
money/fund used in a business enterprise.
Financial management practiced by the
corporate / company can be called as corporate
finance.
Finance function has become so important that
given birth to Financial management as a
separate subject.

3. Financial Management
Effective utilization of amount of money
invested in business is known as Financial
Management.
Financial Management refers to that part of the
management activity which is concerned with
the planning and controlling of firm’s financial
resources

4. Definition of Financial Management
 Howard and Uptron define financial management “as
an application of general managerial principles to the
area of financial decision-making”.
 Weston and Brighem define financial management “as
an area of financial decision making, harmonizing
individual motives and enterprise goal”.
 “Financial management is the operational activity of a
business that is responsible for obtaining and
effectively utilizing the funds necessary for efficient
business operations”- J.L. Massie.

5. Scope of Financial Management
1. Estimating financial requirements
2. Deciding capital structure
3. Selecting a source of finance
4. Selecting a pattern of investment
5. Proper cash management
6. Implementing financial controls
7. Proper use of surpluses

6. Financial Decision
Investment Decisions
Financing Decisions
Dividend Decisions

7. Functional areas of Financial
Management
Determining financial needs
Selecting sources of funds
Financial Analysis & Interpretation
Cost-Volume – Profit Analysis
Capital Budgeting
Working Capital Management
Profit Planning and Control
Dividend Policy

8. Objectives of Financial Management
1. Profit Maximization
2. Wealth Maximization

9. Profit Maximization
 Profit maximization is also called as cashing per
share maximization. It leads to maximize the business
operation for profit maximization
 Ultimate aim of the business concern is earning
profit, hence, it considers all the possible ways to
increase the profitability of the concern.
 Profit is the parameter of measuring the efficiency
of the business concern. So it shows the entire
position of the business concern.
 Profit maximization objectives help to reduce the
risk of the business

10. Wealth Maximization
Wealth maximization is one of the modern
approaches, which involves latest innovations
and improvements in the field of the business
concern. The term wealth means shareholder
wealth or the wealth of the persons those who
are involved in the business concern. Wealth
maximization is also known as value
maximization or net present worth
maximization. This objective is an universally
accepted concept in the field of business

11. Organization of Financial Function

12. Agency Problem
 Agency problem is a conflict of interest inherent in
any relationship where one party is expected to act in
the best interest of another.
 Agency problem is the likelihood that managers may
place personal goals ahead of corporate goals
 In corporate finance, the agency problem usually
refers to a conflict of interest between a company's
management and the company's stockholders.

13. Resolving/ Minimizing Agency Problem
(1)Market Forces
(a) Behavior of security Market participants
(b) Hostile takeover
(2) Agency Cost
(a) Monitoring Expenditures
(b) Bonding Expenditures
(c) Opportunity Costs
(d) Structuring Expenditure

14. Emerging Role of finance manager
(a) Financial structure,
(b) Foreign exchange management,
(c) Treasury operations,
(d) Investor communication,
(e) Management control and
(f) Investment planning.