Basic knowledge of Finance

1. Bachelor in Business
Management (Honors)in
Accounting and Finance Degree
Program
Year 2 Semester 1
BBMA 21053
financial Management
Dr. Vidura Perera
Ph.D. , BBA.( Finance),Sp.(Hons) UOJ, LL.B , DBF (IBSL ), PG dip
Bank Management (IBSL), AIB Sri Lanka, CTHE (USJP).
Senior Lecturer

2. On completion of the Unit the
candidate should be able to:
 Analyze the general environment in which business operate related to finance and risk
involvement.
 Illustrate the relationship between financial objectives and corporate strategies.
 Analyse a range of Financial instruments.
 Analyse capital markets and financial institutions.
 Use the primary Sources of capital of capital and incorporate their cost
when making investment decisions.
 Appraise cash flows from project , including operating , net working capital, and
capital Speeding.
 Appraise the required return
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3. Assessment Guidelines
Assessment Method Outcome Weight
01 Mid Test 1,2,3,4,5 20%
02 Individual
Assignment
6,7,8 20%
03 End
Examination
1,2,3,4, 5,6,7,8 60%

4. LESSON 01
01. INTRODUCTION TO FINANCIAL
MANAGEMENT
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At the end of the session students will be able to,
1. Describe the role of financial management .
02. Discuss the agency theory
03. Demonstrate conflicting stakeholder interests

5. 5
 Finance is a necessary and critical part of any organization. It is
difficult for profit-making or other organizations to sustain
themselves for long without proper finances.
 Apart from this reason, the efficient management of these
financial resources is essential to be sustainable and viable in the
long run.

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WhatWhat is Finance?
is Finance?
• Finance is defined as the management of money
and includes activities such as investing, borrowing,
lending, budgeting, saving, and forecasting. There
are three main types of finance:
• (1) personal,
• (2) corporate,
• (3) public/government.
• This guide will unpack the question: what is
finance?

7. • According to J. L. Massie,
• Financial management is the operational
activity of a business that is responsible for
obtaining and effectively utilizing the funds
necessary for efficient operation.”
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8. What is mean by Financial
Management
• Some Definitions
• “Financial management is the activity concerned with planning,
raising, controlling and administering of funds used in the business.”
– Guthman and Dougal
• “Financial management is that area of business management
devoted to a judicious use of capital and a careful selection of the
source of capital in order to enable a spending unit to move in the
direction of reaching the goals.” – J.F. Brandley
• “Financial management is the operational activity of a business that
is responsible for obtaining and effectively utilizing the funds
necessary for efficient operations.”- Massie

9. Definition of Financial Management
• Financial Management means planning,
organizing, directing and controlling the
financial activities such as procurement
and utilization of funds of the enterprise.
• It means applying general management
principles to financial resources of the
enterprise.

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The Financial Management main role is to plan, organize and
govern all the financial activities of a company. It applies
management ethics to the financial resources of a company.

11. Why Is Finance Management
Important For Companies?
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12. What are the major roles of financial management?
 Financial Decisions and control
 Financial planning
 Capital management
 Allocation and utilization of financial resources
 Cash flow management
 Disposal of surplus
 Financial reporting
 Risk Management
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13. 02. Discuss the agency theory
oAgency theory is a principle that is used to
explain and resolve issues in the relationship
between business principals and their agents.
Most commonly, that relationship is the one
between shareholders, as principals, and
company executives, as agents.
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Two forms of agency theory have developed:
positivist and principal-agent (Jensen, 1983).
Positivist researchers have emphasized
governance mechanisms primarily in large
corporations.

15. .
03. Demonstrate conflicting
stakeholder interests
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A conflict of interest arises when a person
chooses personal gain over the duties to an
organization in which they are a stakeholder
or exploits their position for personal gain in
some way.
All corporate board members have fiduciary
duties and a duty of loyalty to the corporations
they oversee.

16. Examples of stakeholder conflicts
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•Owners vs. Employees. Shareholders want more profit
while employees want higher salaries, better benefits and
more comfortable working conditions. Suppliers vs.
Managers.
•Managers vs. Owners.
•Students questions ???????

17. Developments in Financial
Management
• Digital transformation.
• Digital finance and digital money.
• Crypto currency - the next big thing.
•
• Focus on user experience.
• New risks and challenges.
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18. 10. Discussion
• The relationship between Finance and other
functions

19. Homework (Tutorial)
• Select any Public Limited Company in Sri
Lanka
• Refer its Annual report
• Identify and list the financial Activities at
the particular business
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20. References
• Eugene F. Brighan Michael C. Ehrhardt (2019) Financial Management . (10th
Edition ).