This chapter introduces corporate financial strategy and key concepts. It discusses setting the context for corporate financial strategy by covering risk and return relationships, the two-stage investment process, different models for measuring shareholder value like NPV, economic profit and total shareholder return. The chapter also addresses how value is created, stakeholders in corporate strategy, and issues of agency theory.
International financial,marketing strategy.Liz Mary Jose
The document discusses various aspects of international financial and marketing strategies. It covers topics such as international capital budgeting, selection of funding sources, financial swaps, market identification, product strategies, and pricing strategies. Specifically, it discusses computing cash flows, cost of capital, adjusted present value approaches, interest rate and currency swaps, standardization versus product adaptation, pricing discrimination, skimming versus penetration pricing, and transfer pricing between related entities.
This document discusses financial strategy and objectives for a new business venture. It explains that a financial strategy should answer questions about startup costs, ongoing operating costs, capital needs, and sources of funding. The key components of a financial strategy are identified as sales forecasts, expenses, profits, balance sheets, cash flow projections, and repayment plans. The document also outlines the financial planning process and defines important financial terms like breakeven point, market share, profit margin, return on investment, and the difference between startup costs and operating expenses.
Financial management refers to the efficient and effective management of money to achieve business objectives. It involves making decisions about raising capital, allocating funds, budgeting, and managing current assets. Financial management is important for establishing and operating a business successfully as it provides the necessary financing. The objectives of financial management are to maximize the firm's value, earnings, profitability, and cash flows. Key financial decisions include investment decisions, financing decisions, and dividend decisions.
This document provides an introduction to financial management and related topics. It defines finance and identifies the major areas of finance as financial services and financial management. Financial management is the application of planning and control to finance functions and concerns managing finances for any type of business. The scope of financial management includes anticipating needs, acquiring funds, allocating funds, appropriating profits, and assessing financial activities. Financial management is closely related to economics, accounting, mathematics, production management, marketing, and human resources.
Basic principle of financial statement analysiskhomsasatun
the basic principle of financial statement analysis. purpose's analysis, method of financial statement analysis, and technic of financial statement analysis
This document provides an overview of financial statement analysis. It defines key terms and outlines the major components of analyzing a company's financial statements, including:
- Understanding basic financial statements (balance sheet, income statement) and key ratios
- Analyzing liquidity, leverage, coverage, activity, and profitability ratios
- Comparing ratios internally over time and externally to industry benchmarks
- Evaluating trends to identify potential issues, like high inventory levels reducing Basket Wonders' acid-test ratio
The document uses Basket Wonders as an example, presenting sample financial statements and calculating ratios to demonstrate the analysis process. The goal of analysis is to evaluate a company's financial health and make recommendations to improve performance.
This chapter introduces corporate financial strategy and key concepts. It discusses setting the context for corporate financial strategy by covering risk and return relationships, the two-stage investment process, different models for measuring shareholder value like NPV, economic profit and total shareholder return. The chapter also addresses how value is created, stakeholders in corporate strategy, and issues of agency theory.
International financial,marketing strategy.Liz Mary Jose
The document discusses various aspects of international financial and marketing strategies. It covers topics such as international capital budgeting, selection of funding sources, financial swaps, market identification, product strategies, and pricing strategies. Specifically, it discusses computing cash flows, cost of capital, adjusted present value approaches, interest rate and currency swaps, standardization versus product adaptation, pricing discrimination, skimming versus penetration pricing, and transfer pricing between related entities.
This document discusses financial strategy and objectives for a new business venture. It explains that a financial strategy should answer questions about startup costs, ongoing operating costs, capital needs, and sources of funding. The key components of a financial strategy are identified as sales forecasts, expenses, profits, balance sheets, cash flow projections, and repayment plans. The document also outlines the financial planning process and defines important financial terms like breakeven point, market share, profit margin, return on investment, and the difference between startup costs and operating expenses.
Financial management refers to the efficient and effective management of money to achieve business objectives. It involves making decisions about raising capital, allocating funds, budgeting, and managing current assets. Financial management is important for establishing and operating a business successfully as it provides the necessary financing. The objectives of financial management are to maximize the firm's value, earnings, profitability, and cash flows. Key financial decisions include investment decisions, financing decisions, and dividend decisions.
This document provides an introduction to financial management and related topics. It defines finance and identifies the major areas of finance as financial services and financial management. Financial management is the application of planning and control to finance functions and concerns managing finances for any type of business. The scope of financial management includes anticipating needs, acquiring funds, allocating funds, appropriating profits, and assessing financial activities. Financial management is closely related to economics, accounting, mathematics, production management, marketing, and human resources.
Basic principle of financial statement analysiskhomsasatun
the basic principle of financial statement analysis. purpose's analysis, method of financial statement analysis, and technic of financial statement analysis
This document provides an overview of financial statement analysis. It defines key terms and outlines the major components of analyzing a company's financial statements, including:
- Understanding basic financial statements (balance sheet, income statement) and key ratios
- Analyzing liquidity, leverage, coverage, activity, and profitability ratios
- Comparing ratios internally over time and externally to industry benchmarks
- Evaluating trends to identify potential issues, like high inventory levels reducing Basket Wonders' acid-test ratio
The document uses Basket Wonders as an example, presenting sample financial statements and calculating ratios to demonstrate the analysis process. The goal of analysis is to evaluate a company's financial health and make recommendations to improve performance.
The document discusses dividend policy and models used in Indian corporate sectors. It provides an overview of Walter's model, Gordon's model, and the Modigliani-Miller model. Walter's model shows the relationship between return on investment, cost of equity, and dividend payout ratio. Gordon's model incorporates a growth rate determined by retention ratio and return on investment. The Modigliani-Miller theorem states that dividend policy does not impact firm value if markets are efficient. The document also discusses typical Indian corporate dividend practices and factors affecting dividend policy decisions.
The document discusses financial planning and capitalization. It covers estimating capital requirements, theories of capitalization, and determining if a company is under or over capitalized. The key points are:
- Companies must estimate fixed and working capital needs. The cost and earnings theories of capitalization are used to determine how much funding is required.
- Under or over capitalization can be identified by comparing a company's book value per share to its real value, calculated using earnings and industry capitalization rate.
- If book value is greater than real value, the company is over capitalized. If book value is less than real value, the company is under capitalized. Book value equal to real value means proper capitalization
This presentation contains slides on the topic financial management where I have discussed about the meaning of financial management, various financial decisions involved in it like the capital budgeting, capital structure, working capital management, dividend decision. I hope these slides would be beneficial in understanding the basics of finance in a better way.Capital budgeting is the investment decision ,capital structure is related to financing,working capital is more about liquidity and dividend decision is concerned with the shareholders.
Corporate Finance - Financial Reconstruction and Business ReorganisationDayana Mastura FCCA CA
This document discusses various types of financial reconstruction and business reorganization. It describes organizational reconstruction, which involves changing how a company's operations are organized, and portfolio reconstruction, which involves changing the portfolio of business operations through divestments, demergers, and acquisitions. Reasons for business reorganizations include financial needs like raising cash, and strategic needs like protecting parts of the business. Specific reorganization methods discussed include divestment, management buyouts (MBOs), and management buyins (MBIs). Advantages and disadvantages of MBOs and MBIs are also summarized.
The document outlines various financial objectives and targets that a business may have, including cash flow targets, cost minimization, return on capital employed (ROCE) targets, and shareholders' returns. It discusses examining the types of targets involved in each area, as well as internal and external influences that could impact achieving the financial objectives. Students are asked to prepare a short presentation and/or case study analysis on these topics.
This document summarizes the key aspects of financial management discussed in the passage. It lists the names and student IDs of 8 students representing the Financial Management Unit -1. It then provides 3 sentences on the key topics covered:
The passage discusses the objectives, scope and evolution of financial management. It covers the basic objectives of profit maximization and wealth maximization, and describes the scope of financial management across five areas: anticipation, acquisition, allocation, appropriation and assessment of funds. The evolution of financial management is described across the traditional, transitional and modern phases.
This document provides an overview and introduction to the topic of financial management. It discusses the importance of fundamental financial knowledge and the growing career opportunities in fields like financial analysis, corporate finance, and financial advising. It also lists some common career paths in areas such as corporate management, investment banking, financial planning services, brokerage firms, insurance companies, and commercial banking. Additionally, it previews the key topics that will be covered in the course, including sources of finance, time value of money, capital budgeting, capital structure, dividend policy, and working capital. Finally, it provides guidance on what to prepare for the course, including reviewing financial statements and basic accounting terms, as well as recommended textbooks and reference materials.
Financial management involves planning and controlling a company's finances to achieve its objectives. It is concerned with raising financial resources and using them effectively. The scope of financial management includes anticipating financial needs, acquiring funds from various sources, allocating funds to purchase assets, appropriating profits, and assessing all financial activities. Capital budgeting is the process of evaluating long-term investments and determining which investments are worth pursuing. There are various techniques used in capital budgeting such as payback period, net present value, internal rate of return, and profitability index. Working capital management involves managing current assets like inventory, accounts receivable, and cash as well as current liabilities to ensure the company can continue operating and meet short-term obligations.
Function of Financial and HR Manager Assignment Ali Shah
A financial manager is responsible for providing financial advice and support to clients and colleagues to help them make sound business decisions. They work in a variety of public and private sector organizations like corporations, retailers, financial institutions, and more. Financial managers analyze financial information, monitor cash flows, develop strategic plans, research market trends, manage accounting systems, produce financial reports, and ensure compliance with financial regulations.
Chapter 3 working capital management 3SamsonJohn14
This document summarizes key concepts about working capital management. It discusses working capital terminology like net working capital and cash conversion cycle. The cash conversion cycle measures the average number of days from paying for inventory to collecting from sales. It then discusses factors like inventory, accounts receivable, accounts payable, and cash budgets that influence working capital management policies. Finally, it covers short-term financing sources for working capital like bank loans, commercial paper, and accounts payable.
A business plan outlines a company's goals and strategies, including financial projections. It includes sections on the company's mission, market analysis, operations, management, and financial projections. Financial projections show expected income statements, balance sheets, and cash flows. Assumptions are key inputs for the projections. Planning involves iterative forecasting of debt and interest expenses. Simplified percentage of sales methods estimate line items as a percentage of projected sales. More complex plans forecast accounts separately with assumptions about ratios and time lags. Cash budgets project cash inflows and outflows in detail.
This document provides an overview of financial management. It discusses the scope and importance of financial management, including its objectives and functions. Financial management deals with procuring and effectively utilizing funds for business. The objectives of financial management have traditionally been profit maximization, but a modern approach emphasizes wealth or net present value maximization to improve shareholder value over time while considering risk. Key functions of a financial manager include forecasting financial requirements, making investment, dividend, and cash management decisions, engaging in financial negotiations, and performing market impact analysis.
The document discusses the importance of financial planning and management for businesses. It outlines key financial documents like balance sheets, profit and loss statements, and cash flow statements that are used for financial planning and decision making. The objectives of financial management are to maximize profitability, liquidity, efficiency, return on capital, and growth for businesses. Financial planning is crucial for businesses to effectively manage costs, inventory, cash flow, debt, and financial resources to achieve their goals and objectives.
This presentation provides the complete Role and responsibilities of a person acting as a Finance Manager in any XYZ organization.
One can very well use this as a reference to see the basic Job Description for the post of a Finance Manager and can gain meaningful insights from it.
This document provides an introduction to financial management. It defines finance as a branch of economics concerned with resource allocation and management. Financial management involves planning, directing, monitoring, and controlling a company's monetary resources to achieve financial objectives like creating wealth, generating cash flow, and providing returns. The three key elements of financial management are financial planning to ensure adequate funding, financial control to ensure objectives are met, and financial decision-making regarding investments, financing, and dividends. The three main areas of finance discussed are capital budgeting to evaluate long-term investments, capital structure regarding debt versus equity financing, and working capital management of short-term assets and liabilities involved in day-to-day operations.
Financial objectives are goals or targets set by a business regarding its financial performance. Typical financial objectives include cash flow targets, cost minimization, return on capital employed, and shareholders' returns. Cash flow targets ensure a business has enough cash when needed. Cost minimization aims to raise profits by reducing costs. Return on capital employed measures profit generated relative to money invested. Shareholders' returns objectives focus on dividend per share and dividend yield. A business's financial objectives are influenced by internal factors like stakeholders and strategy, and external factors such as economic climate, competition, and legislation.
This document provides an overview of key concepts in corporate finance including:
- Definitions of finance, business finance, and financial management.
- The objectives of financial management being profit maximization and wealth maximization.
- The scope and importance of financial management in planning, raising funds, investment decisions, and more.
- The relationship between financial management and other business functions like production, accounting, and marketing.
- The roles and functions of a finance manager in areas like financial planning, acquiring and investing funds.
Executive Compensation in Privately Held Companies: Attracting, Motivating an...CBIZ, Inc.
The following presentation was featured at the KC CFO Conference. The presentation details the most effective ways to attract, motivate and retain your top talent. For more information visit: https://www.cbiz.com/insurance-hr/services/human-capital-services
This document discusses the valuation of goodwill for businesses. Goodwill valuation is used to determine the remaining value of a company if it is purchased, and takes into account factors like reputation, management efficiency, market situation, and competitive advantages. Goodwill needs to be valued in cases like company amalgamation, takeovers, share conversions, and management changes. Key factors that affect goodwill valuation include historical and expected future profits, capital employed, market share, brand position, technology, and relationships. Common methods to value goodwill are the average profits method, super profits method, and capitalization method. These methods calculate goodwill using figures like average profits over several years, super profits above a normal rate of return, and capitalizing average
The document discusses financial strategy formulation. It covers acquiring needed capital through various sources of funds like debt and equity. It also discusses developing projected financial statements and budgets to evaluate the impact of different strategies. Managing and optimally using funds is also important, as is evaluating the worth of the business for potential acquisitions or sales. The strategies aim to determine optimal capital structure, procurement of capital, and relationships with financial institutions.
This document discusses the formulation of functional strategies within an organization. It covers the formulation of marketing, financial, production, logistics, research and development, and human resource strategies. For each functional area, key considerations for strategy formulation are provided, such as determining the optimal capital structure, selecting distribution channels, assessing staffing needs, and aligning HR practices with the overall corporate strategy. The document emphasizes that functional strategies must support and help implement the overall business strategy.
The document discusses dividend policy and models used in Indian corporate sectors. It provides an overview of Walter's model, Gordon's model, and the Modigliani-Miller model. Walter's model shows the relationship between return on investment, cost of equity, and dividend payout ratio. Gordon's model incorporates a growth rate determined by retention ratio and return on investment. The Modigliani-Miller theorem states that dividend policy does not impact firm value if markets are efficient. The document also discusses typical Indian corporate dividend practices and factors affecting dividend policy decisions.
The document discusses financial planning and capitalization. It covers estimating capital requirements, theories of capitalization, and determining if a company is under or over capitalized. The key points are:
- Companies must estimate fixed and working capital needs. The cost and earnings theories of capitalization are used to determine how much funding is required.
- Under or over capitalization can be identified by comparing a company's book value per share to its real value, calculated using earnings and industry capitalization rate.
- If book value is greater than real value, the company is over capitalized. If book value is less than real value, the company is under capitalized. Book value equal to real value means proper capitalization
This presentation contains slides on the topic financial management where I have discussed about the meaning of financial management, various financial decisions involved in it like the capital budgeting, capital structure, working capital management, dividend decision. I hope these slides would be beneficial in understanding the basics of finance in a better way.Capital budgeting is the investment decision ,capital structure is related to financing,working capital is more about liquidity and dividend decision is concerned with the shareholders.
Corporate Finance - Financial Reconstruction and Business ReorganisationDayana Mastura FCCA CA
This document discusses various types of financial reconstruction and business reorganization. It describes organizational reconstruction, which involves changing how a company's operations are organized, and portfolio reconstruction, which involves changing the portfolio of business operations through divestments, demergers, and acquisitions. Reasons for business reorganizations include financial needs like raising cash, and strategic needs like protecting parts of the business. Specific reorganization methods discussed include divestment, management buyouts (MBOs), and management buyins (MBIs). Advantages and disadvantages of MBOs and MBIs are also summarized.
The document outlines various financial objectives and targets that a business may have, including cash flow targets, cost minimization, return on capital employed (ROCE) targets, and shareholders' returns. It discusses examining the types of targets involved in each area, as well as internal and external influences that could impact achieving the financial objectives. Students are asked to prepare a short presentation and/or case study analysis on these topics.
This document summarizes the key aspects of financial management discussed in the passage. It lists the names and student IDs of 8 students representing the Financial Management Unit -1. It then provides 3 sentences on the key topics covered:
The passage discusses the objectives, scope and evolution of financial management. It covers the basic objectives of profit maximization and wealth maximization, and describes the scope of financial management across five areas: anticipation, acquisition, allocation, appropriation and assessment of funds. The evolution of financial management is described across the traditional, transitional and modern phases.
This document provides an overview and introduction to the topic of financial management. It discusses the importance of fundamental financial knowledge and the growing career opportunities in fields like financial analysis, corporate finance, and financial advising. It also lists some common career paths in areas such as corporate management, investment banking, financial planning services, brokerage firms, insurance companies, and commercial banking. Additionally, it previews the key topics that will be covered in the course, including sources of finance, time value of money, capital budgeting, capital structure, dividend policy, and working capital. Finally, it provides guidance on what to prepare for the course, including reviewing financial statements and basic accounting terms, as well as recommended textbooks and reference materials.
Financial management involves planning and controlling a company's finances to achieve its objectives. It is concerned with raising financial resources and using them effectively. The scope of financial management includes anticipating financial needs, acquiring funds from various sources, allocating funds to purchase assets, appropriating profits, and assessing all financial activities. Capital budgeting is the process of evaluating long-term investments and determining which investments are worth pursuing. There are various techniques used in capital budgeting such as payback period, net present value, internal rate of return, and profitability index. Working capital management involves managing current assets like inventory, accounts receivable, and cash as well as current liabilities to ensure the company can continue operating and meet short-term obligations.
Function of Financial and HR Manager Assignment Ali Shah
A financial manager is responsible for providing financial advice and support to clients and colleagues to help them make sound business decisions. They work in a variety of public and private sector organizations like corporations, retailers, financial institutions, and more. Financial managers analyze financial information, monitor cash flows, develop strategic plans, research market trends, manage accounting systems, produce financial reports, and ensure compliance with financial regulations.
Chapter 3 working capital management 3SamsonJohn14
This document summarizes key concepts about working capital management. It discusses working capital terminology like net working capital and cash conversion cycle. The cash conversion cycle measures the average number of days from paying for inventory to collecting from sales. It then discusses factors like inventory, accounts receivable, accounts payable, and cash budgets that influence working capital management policies. Finally, it covers short-term financing sources for working capital like bank loans, commercial paper, and accounts payable.
A business plan outlines a company's goals and strategies, including financial projections. It includes sections on the company's mission, market analysis, operations, management, and financial projections. Financial projections show expected income statements, balance sheets, and cash flows. Assumptions are key inputs for the projections. Planning involves iterative forecasting of debt and interest expenses. Simplified percentage of sales methods estimate line items as a percentage of projected sales. More complex plans forecast accounts separately with assumptions about ratios and time lags. Cash budgets project cash inflows and outflows in detail.
This document provides an overview of financial management. It discusses the scope and importance of financial management, including its objectives and functions. Financial management deals with procuring and effectively utilizing funds for business. The objectives of financial management have traditionally been profit maximization, but a modern approach emphasizes wealth or net present value maximization to improve shareholder value over time while considering risk. Key functions of a financial manager include forecasting financial requirements, making investment, dividend, and cash management decisions, engaging in financial negotiations, and performing market impact analysis.
The document discusses the importance of financial planning and management for businesses. It outlines key financial documents like balance sheets, profit and loss statements, and cash flow statements that are used for financial planning and decision making. The objectives of financial management are to maximize profitability, liquidity, efficiency, return on capital, and growth for businesses. Financial planning is crucial for businesses to effectively manage costs, inventory, cash flow, debt, and financial resources to achieve their goals and objectives.
This presentation provides the complete Role and responsibilities of a person acting as a Finance Manager in any XYZ organization.
One can very well use this as a reference to see the basic Job Description for the post of a Finance Manager and can gain meaningful insights from it.
This document provides an introduction to financial management. It defines finance as a branch of economics concerned with resource allocation and management. Financial management involves planning, directing, monitoring, and controlling a company's monetary resources to achieve financial objectives like creating wealth, generating cash flow, and providing returns. The three key elements of financial management are financial planning to ensure adequate funding, financial control to ensure objectives are met, and financial decision-making regarding investments, financing, and dividends. The three main areas of finance discussed are capital budgeting to evaluate long-term investments, capital structure regarding debt versus equity financing, and working capital management of short-term assets and liabilities involved in day-to-day operations.
Financial objectives are goals or targets set by a business regarding its financial performance. Typical financial objectives include cash flow targets, cost minimization, return on capital employed, and shareholders' returns. Cash flow targets ensure a business has enough cash when needed. Cost minimization aims to raise profits by reducing costs. Return on capital employed measures profit generated relative to money invested. Shareholders' returns objectives focus on dividend per share and dividend yield. A business's financial objectives are influenced by internal factors like stakeholders and strategy, and external factors such as economic climate, competition, and legislation.
This document provides an overview of key concepts in corporate finance including:
- Definitions of finance, business finance, and financial management.
- The objectives of financial management being profit maximization and wealth maximization.
- The scope and importance of financial management in planning, raising funds, investment decisions, and more.
- The relationship between financial management and other business functions like production, accounting, and marketing.
- The roles and functions of a finance manager in areas like financial planning, acquiring and investing funds.
Executive Compensation in Privately Held Companies: Attracting, Motivating an...CBIZ, Inc.
The following presentation was featured at the KC CFO Conference. The presentation details the most effective ways to attract, motivate and retain your top talent. For more information visit: https://www.cbiz.com/insurance-hr/services/human-capital-services
This document discusses the valuation of goodwill for businesses. Goodwill valuation is used to determine the remaining value of a company if it is purchased, and takes into account factors like reputation, management efficiency, market situation, and competitive advantages. Goodwill needs to be valued in cases like company amalgamation, takeovers, share conversions, and management changes. Key factors that affect goodwill valuation include historical and expected future profits, capital employed, market share, brand position, technology, and relationships. Common methods to value goodwill are the average profits method, super profits method, and capitalization method. These methods calculate goodwill using figures like average profits over several years, super profits above a normal rate of return, and capitalizing average
The document discusses financial strategy formulation. It covers acquiring needed capital through various sources of funds like debt and equity. It also discusses developing projected financial statements and budgets to evaluate the impact of different strategies. Managing and optimally using funds is also important, as is evaluating the worth of the business for potential acquisitions or sales. The strategies aim to determine optimal capital structure, procurement of capital, and relationships with financial institutions.
This document discusses the formulation of functional strategies within an organization. It covers the formulation of marketing, financial, production, logistics, research and development, and human resource strategies. For each functional area, key considerations for strategy formulation are provided, such as determining the optimal capital structure, selecting distribution channels, assessing staffing needs, and aligning HR practices with the overall corporate strategy. The document emphasizes that functional strategies must support and help implement the overall business strategy.
Overview of Corporate Finance in India a presentationfootydigarse
Slide 1: Introduction
Welcome to the presentation on Corporate Finance in India.
Overview of the financial landscape and key aspects of corporate finance.
Slide 2: Importance of Corporate Finance
Explanation of why corporate finance is vital for businesses.
Role in maximizing shareholder value, strategic decision-making, and capital allocation.
Slide 3: Financial Markets in India
Overview of India's financial markets: stock exchanges, bond markets, money markets.
Regulatory bodies such as SEBI (Securities and Exchange Board of India).
Slide 4: Sources of Corporate Finance
Equity financing: IPOs, rights issues, private placements.
Debt financing: bank loans, corporate bonds, debentures.
Hybrid instruments: convertible bonds, preference shares.
Slide 5: Capital Structure Decisions
Explanation of capital structure and its importance.
Factors influencing capital structure decisions.
Trade-off between debt and equity financing.
Slide 6: Valuation Methods
Common valuation methods in India: Discounted Cash Flow (DCF), Comparable Company Analysis (CCA), Precedent Transactions Analysis.
Importance of accurate valuation for investment decisions.
Slide 7: Corporate Governance
Overview of corporate governance principles in India.
Role of the board of directors, transparency, and accountability.
Slide 8: Risk Management
Types of financial risks faced by Indian corporations: market risk, credit risk, operational risk.
Risk management strategies: hedging, diversification, insurance.
Slide 9: Mergers and Acquisitions (M&A)
Trends in M&A activity in India.
Motivations behind M&A transactions.
Regulatory framework and approval process.
Slide 10: Case Studies
Analysis of notable corporate finance transactions in India.
Learnings from successful and unsuccessful deals.
Slide 11: Future Outlook
Emerging trends and opportunities in Indian corporate finance.
Potential challenges and how to address them.
Slide 12: Conclusion
Recap of key points covered in the presentation.
Importance of effective corporate finance management for sustainable growth.
Slide 13: Questions and Discussion
Open the floor for questions and discussion.
This document provides an introduction to financial management. It discusses key topics like the meaning and scope of financial management, the goals of profit maximization versus wealth maximization, finance functions, and organizational structure. It also covers the relationship between finance and accounting, interfaces with other functions, and different forms of business organization. The overall summary is that financial management involves acquiring and using funds to achieve organizational goals in the most profitable way by making decisions around investing, financing, and dividends.
Financial management involves planning, directing, monitoring, and controlling the monetary resources of an organization. The key objectives are to create wealth, generate cash flows, and provide an adequate return on investment while considering risks. Financial managers obtain funds internally and externally, make investment and financing decisions, and connect the organization to financial markets. The overall goal is to maximize shareholder value over the long-term by setting objectives around liquidity, profitability, efficiency, growth, and return on capital. Ten core principles like risk-return tradeoffs and time value of money form the foundation of effective financial decision making.
This document provides an overview of financial management. It defines finance as the art and science of managing money and financial management as the activity concerned with planning and controlling a firm's financial resources. The document outlines the scope of finance management, including production, marketing, and finance as important business activities. It also describes the objectives of financial management as maximizing shareholders' wealth by accounting for the timing and risk of returns. Overall, the document introduces some key concepts in financial management such as the roles of different financial managers, goals of financial management, and the organization of finance functions within a company.
This document discusses various key concepts in financial management. It begins by defining financial management and its scope/elements, which include investment decisions, financial decisions, and dividend decisions. It then discusses three elements of financial management: financial planning, financial control, and financial decision-making. Other topics covered include functions of financial management, importance of financial management, types of finance, financial goals of organizations, financial forecasting, financial planning, break-even analysis, fixed costs, and variable costs.
The Future of Digital Lending in Ethiopia
The traction that met Michu and Telebirr early on highlights the massive demand for uncollateralized digital credit in Ethiopia. New entrants such as Kacha Digital Financial services have also announced they’re eying the micro-credit market. The impending entrance of Safaricom’s M-PESA is undoubtedly going to have an impact, but the telecom operator must wait until the National Bank of Ethiopia (NBE) sets rules before it can enter the fray.
Among the most significant recent developments in the digital lending sphere is credit cards. Awash Bank has announced it will start issuing credit cards to its clients in both secured and unsecured loan forms. Clients will be able to access as much as a few hundred thousand Birr in credit from the bank, with limits depending on the loan type.
It is a significant milestone for the Ethiopian financial sector, and the development is likely to be followed up by even more big changes.
Central bank regulators are working on a digital lending framework that will likely see micro-credit providers gain a step up in the financial sector. As it stands, mobile money providers are the only non-traditional financial institutions allowed to engage in micro-credit service but are still required to partner with banks or MFIs to access loanable funds.
The central bank, however, has recently expressed intentions to allow fintechs to loan out funds sourced from entities other than banks or MFIs. Common practice in other countries indicates that these other sources are usually private equity firms, individuals or development institutions. This model is practiced in various countries across the globe.
For instance, In Kenya, Digital Credit Providers (DCPs) were not regulated by the central bank until recently and sourced funds from various sources without having to disclose them to the central bank.
Nonetheless, close to 300 DCPs have applied for licenses from the Kenyan central bank this year after regulators put out a call following a decision that compels lenders to disclose their source of funding. Ten of them have already been licensed. Development Financial Institutions, commercial banks, private equity firms and high-net-worth individuals are some of the popular sources of funding that Kenya-based DCPs use for lending.
The implementation of various models of lending come with their own advantages and disadvantages. Here are the possible opportunities and threat that the Ethiopian market will experience as a result of the upcoming changes:
Opportunities
Encourages the development of new lending models such as peer-to-peer (P2P lending). Countries with advanced digital lending models have progressed to be able to offer a slew of innovative lending products. Diversifying the source of funds would allow creditors to experiment with innovative use cases based on their own risk appetite as they’ll be able to retain the risk on their own.
Provides a more attractive business cases.
Dividend decision in financial management and decision makingshrutisingh143670
The document discusses factors to consider when determining a company's dividend policy. It explains that a dividend policy involves deciding how much of profits to distribute as dividends versus retaining earnings. The dividend payout ratio, stability of dividends, liquidity, growth plans, and control are important factors to consider. An effective policy balances paying dividends to investors with retaining enough earnings to finance future growth opportunities.
This document discusses key concepts in business finance and financial management. It defines business finance as money and credit used in business operations. There are two types of capital: fixed capital for long-term assets, and working capital for day-to-day operations. Financial management involves optimal procurement and use of funds. Its objectives include ensuring adequate funding, minimizing costs and risks, and maximizing returns. Financial decisions encompass investment, financing, and dividends. Factors like costs, risks, and cash flows influence these decisions. Financial planning and maintaining an appropriate capital structure are also discussed.
This document discusses the three major financial decisions that financial managers must make: investment decisions, financing decisions, and dividend decisions. It provides details on the types of assets and projects considered under investment decisions. Financing decisions involve determining the appropriate capital structure and balancing the costs and risks of debt vs. equity. Dividend decisions relate to determining the optimal dividend payout policy that maximizes shareholder wealth. The document also outlines several factors that affect each type of financial decision.
Financial management is pivotal for the smooth functioning of an organization. It involves planning, organizing, directing, and controlling financial activities such as procuring and utilizing funds. The key functions of financial management include financial planning and forecasting, determining the optimal capital structure, investing funds productively, maintaining proper liquidity, disposing of surplus assets, and establishing financial controls. Effective financial management helps ensure operational efficiency, build adequate reserves, maximize profitability, and fulfill the goals and vision of the organization.
The Meaning & Role Of Finance Management
Points Discussed are:
1. What is Finance?
2. Functions of financial Manager
3. The Goals of Financial Management
4. Roles of Financial Management
5. Functions of Financial Management
6. Activities Of Financial Management
7. Conclusion
Strategic financial management combines accounting and financial management to help achieve organizational objectives through strategic decisions around financing, investments, dividends and portfolios. It is important for long-term survival and market leadership. Financial policy and strategic management are closely linked, as strategic decisions require financial considerations and financial policies shape organizational strategy and growth. Sustainable growth requires balancing financial goals with distributing resources in a way that benefits future stakeholders.
The document defines capital structure as the permanent long-term financing of a company, including long-term debt, common stock, preferred stock, and retained earnings. It discusses the concept of optimal capital structure, which minimizes a firm's cost of capital. The document also outlines various approaches to establishing capital structure, including EBIT-EPS analysis and cash flow analysis. It evaluates capital structure based on factors like flexibility, risk, return, and control.
The functions of a financial manager include:
1. Estimating financial requirements, selecting sources of funds, allocating funds, analyzing financial performance, capital budgeting, working capital management, profit planning and control, providing fair returns to investors, and maintaining liquidity and maximizing wealth.
2. Selecting the right sources of funds at the right time and cost, such as equity, debt, or preferred shares.
3. Distributing funds between capital and operating expenditures and evaluating investment proposals.
Working capital management involves determining the appropriate level and financing of current assets, such as cash, inventory, and accounts receivable. It aims to balance holding costs of current assets with costs of shortages. Key aspects include calculating net working capital as current assets minus current liabilities, understanding operating cycles involving days of inventory and receivables outstanding, and choosing financing strategies like matching asset and liability maturities or relying more on long-term or short-term funds. The optimal working capital strategy minimizes total relevant costs subject to meeting business needs.
Financial managers perform several key functions:
1. They estimate capital requirements, determine capital structure by choosing an optimal debt-equity ratio, and select sources of funds.
2. Financial managers procure the necessary funds, ensure those funds are prudently invested to maximize returns based on safety, profitability and liquidity.
3. They manage cash flows, dispose of profits, and implement financial controls like budgeting to evaluate financial performance and returns on investment.
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2. Formulation of Functional Strategy: Finaincial
Introduction
Marketing Strategy Formulation Financial
Strategy Formulation Production Strategy
Formulation Logistics Strategy Formulation
Research and Development Strategy Formulation
Human Resource Strategy Formulation
3. Financial Strategy
• Financial Strategy involves:
• Acquiring Needed Capital / Source of Funds
• Developing Projected Financial Statements / Budgets
• Management / Usage of Funds
• Evaluating the Worth of Business
• Some examples of decisions that may require finance / accounting policies
are:
• To raise capital with short term debt, long term debt, preferred stock, common
stock etc.
• To lease or to buy fixed assets.
• To determine appropriate dividend payout ratio.
• To determine the amount of cash that must be kept in hand etc.
4. Sources of Funds
• Business requires additional capital, besides net profit from operations, and
the sale of assets the other sources of funds are Debt and Equity (Capital
structure of Firm).
• Determining optimal mix of debt and equity in firms capital structure is vital.
• Firm should have enough debt in its capital structure to boost ROI (earning
more than cost of debt).
• In adverse situation high debt can lead to poor stockholders return and
jeopardize companies survival.
• Fix debt obligations must be met regardless the circumstances.
• Issuance of stock can have issues like ownership, control of enterprise which
can lead to hostile takeovers, mergers, and acquisitions.
5. Sources of Funds
• The major factors for which strategies are to made are:
• Capital Structure
• Procurement of Capital
• Working Capital Borrowings
• Reserves and Surplus as source of Funds
• Relationships with Lenders, Bank, and Financial Institutions
• Source of Funds (External Borrowings or Internal Financing)
6. Projected Financial Statements / Budgets
• Budgets allows an organization to examine the expected results of various
actions (implementation decisions) and approaches. Eg. Increase in
promotion expenditure by 50% (market development strategy), Salary
increase by 25% (market penetration Strategy), R&D expenditure increase
by 70% (Product Development) or to sell common stock to raise capital for
diversification.
• A pro forma income statement and balance sheet allow organization to
compute projected financial ratios, compare them with prior years and
industry averages under various strategy implementation scenarios.
• Companies prepare projected financial statements to project future
expenses and earnings more reasonably.
7. Projected Financial Statements / Budgets
• A financial budget is the document that details how funds will be obtained and
spent for a specified period of time. (annual budgets are more common).
• Financial budgets are viewed as the planned allocation of firm’s resources based
on forecasts of the future. The different types of budgets include cash budgets,
operating budgets, sales budget, profit budget, factory budget, capital budget,
expense budget, divisional budget, variable budget, flexible budget, fixed budget
etc. These are important in guiding strategy implementation.
• Financial budgets limitations are: Cumbersome to make, expensive, Over
budgeting / under budgeting can cause problems, they can become substitute for
objectives, budgets hides inefficiencies if based solely on precedence rather than
periodic evaluation of circumstances.
• Budgets are sometimes used as instruments of tyranny – frustration / resentment.
8. Management and Usage of Funds
• It deals with investments and Asset mix decisions. It involves decisions like capital
investment, fixed asset acquisition, current assets, loans, advances, dividend
decisions, and relationship with share holders.
• Usage of funds is important since it relates to the efficiency and effectiveness of
resource utilization in the process of strategy implementation.
• Management of fund is important area of financial strategy and strategic decisions
are made for the system of finance, accounting, budgeting, management control
system, cash, credit, and risk management, cost control and reduction, tax
planning and advantages. All this leads to optimum utilization of funds.
• Organizations that implements strategies of stability, growth, and retrenchment
cannot escape rigors of proper management of funds.
• Financial plans and policies however present dilemma before management. The
priorities of management may often conflict with those of share holders.
9. Evaluating the Worth of Business
• Integrative, Intensive, Diversification strategies are implemented by acquiring
other firms, and retrenchment may result in sale of division of organization.
Here it is strategically important to establish financial worth / cash value of
business.
• There are three approaches to determination of business worth;
• The first approach is to determine net worth or stock holder’s equity. Net worth is
sum of common stock, additional paid in capital, and retained earnings. After this
we add or subtract additional amount of goodwill, overvalued, and undervalued
assets. The total obtained provides a reasonable estimate of firms monetary value.
• I the firm has goodwill it will be listed in balance sheet as intangibles.
10. Evaluating the Worth of Business
• The second approach is measuring the value of firms growth based largely on
future benefits its owners may derive through net profits. Establish business
worth as five times the firm’s current annual profit. Note: Firms suppress
earnings in financial statement to minimize taxes.
• The third approach is letting market determine a business worth.
• Base the firm’s worth on selling price of similar company and make a comparison.
• Use price earning ration where we divide the market price of common stock by
annual earnings per share and multiply this number by the firm’s average net
income for the past five years.
• Outstanding shares method where we multiply number of shares outstanding by
the market price per share and add a premium. The premium is simply a per share
amount that a person or firm is willing to pay to control or acquire the company.
11. Financial Management Strategies
Capital Acquisitions
• Debt Leverage, Stock Sales, & Gains From Operations
• Equity Financing Is Preferred For Related Diversification
• Debt Financing Is Preferred For Unrelated Diversification
• Leveraged Buyouts (Lbos) Make The Acquired Firm Pay Off The Debt
Can We Grow By Relying On Only Internal Cash Flows? Do Stock Sales
Dilute Ownership Control?
Does A Large Debt Ratio Cripple Future Growth? Does Strong Leverage
Boost Earnings Per Share? Does High Debt Deter Takeover Attempts?
Resource Allocations
• Dividends, Stock Price, & Reinvestment
• Reinvest Earnings In Fast-growing Companies
• Keeping The Stockholders Contented With Consistent Dividends
• Use Of Stock Splits ( Or Reverses) To Maintain High Stock Prices
• Tracking Stock Keeps Interest In Company, But Doesn’t Allow
Takeover