financial management

2. DEFINITION
• It. refers to the efficient and effective management of money in
such a manner to achieve objectives of the firm .
• It gives answer to .how to raise capital ? How to allocate it.? etc.
• Not only long term budgeting but also how to allocate short term
resources like current asset.
• It includes complete study of financial decisions

3. IMPORTANCE OF F.M.
• No business, whether big, medium, or small can be started
without an adequate amount of finance. Right from the very
beginning, i.e., conceiving an idea to business, finance is
needed to promote or establish the business, acquire fixed
assets, make investigation such as market survey etc,
develop product, keep men & machine at work, encourage
management to make progress and create values

4. IMPORTANCE OF F.M.
• The importance of corporation finance has arisen because of the
fact that present day business activities are predominantly
carried on company or corporate from of the organisation.
Following factors further increased the importance of FM
• The increase in size and influence of the business enterprise
• Wide distribution of corporate ownership
• Separation of ownership & management

5. IMPORTANCE OF F.M.
FM is indispensable to any organ as it helps
• Financial planning & successful promotion of an enterprise
• Acquisition of funds as & when required at minimum possible cost
• Proper use & allocation of funds
• Taking sound financial decision
• Improving the profitability through financial controls
• Increasing the wealth of investors and nations, &
• Promoting & mobilising individual & corporate savings

6. OBJECTIVES OF F.M
• FM is concerned with procurement &use of funds. Its main aim is to
use business fund in such a way that the firm’s value or earnings are
maximised. This objective can be achieved by
Profit Maximisation
Profitability maximisation
Wealth maximisation
Cash maximisation

8. SCOPE OF F.M
• Estimating Financial Requirement
• Deciding Capital Structure
• Selecting a Source of Finance
• Selecting a Patten of Investment
• Proper Cash Management
• Implementing Financial Control
• Proper use of surplus

10. FINANCIAL DECISION
• Investment Decision
 Long-term investment decision.
 Short-term investment decision
• Financing Decision
• Dividend Decision

12. INVESTMENT DECISION
• Firms have scarce resources that must be allocated among competitive uses
• It includes not only those that creates revenues and profits
• Investment decisions are related with assets composition of firm.
• It further get classified into 2 categories
• Capital budgeting decisions gives info about which asset should be purchased
• To buy or get on lease , to produce output or to procure from suppliers.
• Objective of this decision is to identify those assets which are worth more than they
cost.

13. CONTINUE….
• Working capital management deals with management of
current assets of firm.
• A financial manager has to ensure sufficient and adequate
working capital of firm.

14. FINANCING DECISION
• This deals with financing pattern of firm.
• It makes decision regarding where to invest these resources and how to raise them.
• There are two sources of finance namely shareholders funds and borrowed funds .
• Borrowed funds are relatively cheap but always entail a risk.
• Shareholder funds is the main source of fund for firm which have low risk and
comprises of equity shares and preference shares .
• Analysis of leverage , EBIT-EPS etc. are some of method which are used in this
decision making .

15. DIVIDEND DECISION
• It deals with appropriation of after tax profits .
• Financial manager have to decide what amount of profit will be reinvested and what
amount shall be distributed among shareholders.
• It deals with analysis of total cash requirement which will be distributed among
shareholders.

16. FUNCTIONAL AREAS OF F.M.
• Determining Financial Needs
• Selecting the Source of Funds
• Financial Analysis & interpretation
• Cost-Volume –Profit Analysis
• Capital Budgeting
• Working capital Management
• Profit planning & control
• Dividend policy

17. FUNCTIONS OF FINANCIAL MANAGER
• Financial Forecasting & Planning
• Acquisition of Funds
• Investment of Funds
• Helping in valuation decision
• Maintain proper liquidity

19. FINANCIAL DECISION MAKING
• Financial decisions are taken by financial manager on a regular basis thus have to
make decision making. Working capital management and dividend decision are
almost done on regular basis, in order to make this process of financial decision
making , it is necessary
• To identify the groups whose interest is considered and
• To identify goals , achievement of which helps in measuring impact of these
decisions on relevant group.

21. F.M IS CONCERNED WITH
• In simple language
• Raising of fund from the market
• Investing the funds in most appropriate assts
• Procurement of funds & their effective utlisation
• Management of working fund onl